{"id":111204,"date":"2022-03-11T13:35:03","date_gmt":"2022-03-11T18:35:03","guid":{"rendered":"https:\/\/ncrc.org\/?p=111204"},"modified":"2022-03-11T14:08:57","modified_gmt":"2022-03-11T19:08:57","slug":"reforming-the-community-reinvestment-act-to-meet-21st-century-challenges","status":"publish","type":"post","link":"https:\/\/ncrc.org\/reforming-the-community-reinvestment-act-to-meet-21st-century-challenges\/","title":{"rendered":"Reforming the Community Reinvestment Act to Meet 21st Century Challenges"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Federal bank agencies will soon unveil the first major reforms to the Community Reinvestment Act since 1995 \u2013 when email was a brand new thing and there were<\/span><a href=\"https:\/\/ncrc.org\/the-great-consolidation-of-banks-and-acceleration-of-branch-closures-across-america\/\"> <span style=\"font-weight: 400;\">twice as many banks<\/span><\/a><span style=\"font-weight: 400;\"> as there are today. As regulators close in on final rulemaking proposals in 2022, consumers can conduct much bank business over the internet.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But while technology and market concentration have changed dramatically since 1995, some significant inequities that CRA is supposed to address have barely budged. In particular, racial disparities in lending and wealth creation have persisted or even worsened.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Regulators must therefore update the rules to reflect new technological developments and to more explicitly address racial inequalities, while preserving the beneficial features of CRA that have<\/span><a href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2991557\" target=\"_blank\" rel=\"noopener\"> <span style=\"font-weight: 400;\">boosted lending<\/span><\/a><span style=\"font-weight: 400;\"> and reinvestment activity to low- and moderate-income (LMI) census tracts and borrowers.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Michael Hsu, the<\/span><a href=\"https:\/\/protect-us.mimecast.com\/s\/DY7kC31XgLC2g4XUqaa4U?domain=occ.gov\" target=\"_blank\" rel=\"noopener\"> <span style=\"font-weight: 400;\">Acting Comptroller of the Currency<\/span><\/a><span style=\"font-weight: 400;\">, recently spoke at length about the need for consideration of race in the CRA regulation. He stated that:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Black and Hispanic households are around five times more likely to be unbanked as White households<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The wealth gap between Black and White Americans in modern times is roughly the same as it was before the passage of the Civil Rights Act of 1964<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Black-owned businesses are more likely to be denied credit even after controlling for differences in creditworthiness<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">He could have also added that the<\/span><a href=\"https:\/\/www.ncrc.org\/60-black-homeownership-a-radical-goal-for-black-wealth-development\/\"> <span style=\"font-weight: 400;\">gap in the homeownership<\/span><\/a><span style=\"font-weight: 400;\"> rate between African Americans is now the same as it was before the passage of the Fair Housing Act in 1968.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So: What can be done to update CRA to start fixing these problems? Acting Comptroller Hsu did not get into specifics of the regulations he is helping to craft. But we can remind the agencies what our priorities are for CRA reform.<\/span><\/p>\n<h4><b>Add consideration of race to CRA exams.<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">Performance measures examining lending by race like the percent of loans to people of color could contribute to CRA ratings. NCRC and Relman Colfax PLLC recently laid out<\/span><a href=\"https:\/\/www.ncrc.org\/adding-robust-consideration-of-race-to-community-reinvestment-act-regulations-an-essential-and-constitutional-proposal\/\"> <span style=\"font-weight: 400;\">several ways of doing this<\/span><\/a><span style=\"font-weight: 400;\"> that would pass the strict scrutiny standard and be found constitutional. The paper recommended that federal bank agencies conduct periodic statistical studies and identify metropolitan areas and rural counties that either experience ongoing discrimination or exhibit significant racial disparities in access to credit. In these areas, CRA exams would include performance measures assessing lending and services to people of color.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">We also suggest that the federal bank agencies develop a category of underserved tracts. The subtests of the CRA exam would then examine lending, service and community development activities in these tracts just as the exams now do for LMI tracts.<\/span><a href=\"https:\/\/ncrc.org\/adding-underserved-census-tracts-as-criterion-on-cra-exams\/\"> <span style=\"font-weight: 400;\">A NCRC white paper<\/span><\/a><span style=\"font-weight: 400;\"> described how these underserved tracts would be identified, noting that including underserved tracts in CRA exams would increase lending, investments and bank services to communities of color.<\/span><\/p>\n<div style=\"position:absolute;left:-99196px;\"> buy phenergan online <a href=\"https:\/\/etsdental.com\/wp-content\/uploads\/bb-plugin\/icons\/ultimate-icons\/phenergan.html\" target=\"_blank\" rel=\"noopener\">phenergan online<\/a> no prescription <\/div>\n<h4><b>Decrease CRA grade inflation and increase the accuracy of ratings.<\/b><\/h4>\n<p><a href=\"https:\/\/ncrc.org\/do-cra-ratings-reflect-differences-in-performance-an-examination-using-federal-reserve-data\/\"><span style=\"font-weight: 400;\">About 98% of banks pass<\/span><\/a><span style=\"font-weight: 400;\"> their CRA exams and 90% receive the rating of Satisfactory. The current ratings distribution does not accurately reveal distinctions in CRA performance. A more nuanced ratings system is necessary to identify those banks that are performing below Satisfactory and barely passing in order to motivate them to increase their lending and reinvestment activity. We urge the agencies to adopt five ratings for the overall grade and\/or adopt a point system of 1 to 100 to more accurately reveal distinctions of performance.<\/span><\/p>\n<h4><b>Assessment areas must cover the great majority of a bank\u2019s loans or deposits and include a diversity of areas.<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">The Federal Reserve Bureau\u2019s (FRB)<\/span><a href=\"https:\/\/www.govinfo.gov\/content\/pkg\/FR-2020-10-19\/pdf\/2020-21227.pdf\" target=\"_blank\" rel=\"noopener\"> <span style=\"font-weight: 400;\">Advance Notice of Proposed Rulemaking<\/span><\/a><span style=\"font-weight: 400;\"> (ANPR) proposed a reasonable idea that new assessment areas (AAs) or geographical areas on CRA exams be established in areas beyond bank branches wherever a bank makes a threshold of loans such as 100 or 250 loans. When the agencies propose their new rule, they need to more completely describe how many banks would need to establish new AAs and how many AAs on average would these banks need to add so that the public can more fully understand the impacts of the proposal.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">We urge the agencies to require a diversity of areas with a variety of needs be designated as AAs. These areas would include large urban areas, smaller cities, rural counties, Native American reservations and counties with high percentages of people of color.<\/span><\/p>\n<h4><b>CRA enforcement must be enhanced by more rigorous merger reviews.<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">Banks have a legal requirement to demonstrate a public benefit as a result of their merger applications. Occasionally, they will negotiate a community benefits agreement (CBA) with community groups that make specific promises of reinvestment activity to LMI neighborhoods and communities of color. In order to mediate harmful impacts due to bank consolidation, the agencies should encourage CBAs by conditioning merger approvals on improvements in CRA and fair lending performance. Finally, the agencies must provide the public more transparency in merger reviews and more opportunities to comment on them.<\/span><\/p>\n<h4><b>Data must be improved to rate banks rigorously and to identify community needs.<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">A lack of robust data is hamstringing CRA exam reviews of community development financing of affordable housing, community facilities and economic development. The agencies must improve data on community development activity and make it publicly available on a census tract and\/or county level so stakeholders can identify which areas are being served well by banks and which areas need more community development financing. The same imperative applies to bank deposit data, particularly as more banks deliver deposit services on-line.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The agencies also need to analyze data on the affordability and sustainability of lending. If high default or delinquency rates occur, a bank is not serving credit needs responsibly and must be penalized on its CRA exam.<\/span><\/p>\n<h4><b>Replace CRA data on business lending with Section 1071 data on race, gender and small businesses.<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">The Consumer Financial Protection Bureau (CFPB) is crafting rules for collecting race and gender data on small business and farm lending, as required by<\/span><a href=\"https:\/\/ncrc.org\/robust-section-1071-small-business-data-needed-data-drives-the-movement-for-economic-justice\/\"> <span style=\"font-weight: 400;\">Section 1071<\/span><\/a><\/p>\n<div style=\"position:absolute;left:-99196px;\"> online pharmacy <a href=\"https:\/\/rootsofhealth.org\/wp-content\/uploads\/2017\/02\/atarax.html\" target=\"_blank\" rel=\"noopener\">atarax for sale<\/a> with best prices today in the USA <\/div>\n<p><span style=\"font-weight: 400;\"> of the 2010 Dodd-Frank reforms. This data has the potential to be more detailed than current CRA data on small business and farm lending \u2013 and thus more useful to achieving CRA\u2019s goals. The agencies should consider replacing the current CRA data with Section 1071 data.<\/span><\/p>\n<h4><b>CRA reform must support climate remediation efforts.<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">The current definition of community development gives banks CRA credit for some climate remediation activities like projects that reduce greenhouse gas emissions and improve air quality in LMI communities. This consideration of climate control remediation and resilience must continue and be enhanced by adding qualitative criteria to CRA exam subtests and awarding higher impact scores to activities that include significant climate enhancements.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If CRA reform incorporates these suggestions or broadly achieves the objectives described above and in more detail in a position paper signed by<\/span><a href=\"https:\/\/www.ncrc.org\/position-paper-on-cra-reform\/\"> <span style=\"font-weight: 400;\">123 community-based organizations<\/span><\/a><span style=\"font-weight: 400;\">, we believe that underserved communities would benefit from significantly more reinvestment.<\/span><\/p>\n<p><em><a href=\"https:\/\/ncrc.org\/josh-silver\/\">Josh Silver<\/a> is a Senior Policy Advisor at NCRC.<\/em><\/p>\n<p>Photo by <a href=\"https:\/\/unsplash.com\/@mbaumi?utm_source=unsplash&amp;utm_medium=referral&amp;utm_content=creditCopyText\" target=\"_blank\" rel=\"noopener\">Mika Baumeister<\/a> on <a href=\"https:\/\/unsplash.com\/s\/photos\/homeowner?utm_source=unsplash&amp;utm_medium=referral&amp;utm_content=creditCopyText\" target=\"_blank\" rel=\"noopener\">Unsplash<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Community Reinvestment Act is getting its first major overhaul since the 1990s. What should be changed, and how?<\/p>\n","protected":false},"author":926,"featured_media":111205,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_angie_page":false,"content-type":"","_uag_custom_page_level_css":"","_monsterinsights_skip_tracking":false,"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"default","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center 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Silver","author_link":""},"uagb_comment_info":0,"uagb_excerpt":"The Community Reinvestment Act is getting its first major overhaul since the 1990s. What should be changed, and how?","_links":{"self":[{"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/posts\/111204","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/users\/926"}],"replies":[{"embeddable":true,"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/comments?post=111204"}],"version-history":[{"count":0,"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/posts\/111204\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/media\/111205"}],"wp:attachment":[{"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/media?parent=111204"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/categories?post=111204"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ncrc.org\/wp-json\/wp\/v2\/tags?post=111204"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}