what is the community reinvestment act cra 
the community reinvestment act cra is a federal law enacted in 1977 to encourage depository institutions to meet the credit needs of the communities where they are chartered including low and moderate income neighborhoods 1the cra requires federal banking agencies to assess how well each institution fulfills its obligations to these communities the agencies must consider these performance ratings when evaluating applications for future approval of bank mergers charters acquisitions branch openings and deposit facilities 2understanding the community reinvestment act cra before the community reinvestment act and other fair housing laws u s banks systematically denied mortgages to black americans and other people of color who lived in certain areas redlined by a federal government agency called the home owners loan corporation holc 6 the holc created maps that classified neighborhoods across the country on a perceived level of lending risk based on information gathered from various sources including local appraisers loan officers city officials and real estate agents 7the neighborhoods were color coded on maps with each color representing the area s perceived risk to lenders holc deemed the red communities hazardous describing them as characterized by detrimental influences in a pronounced degree undesirable population or an infiltration of it 8 neighborhoods with predominantly racial and ethnic minority populations were colored red hence redlined the maps were a tool for widespread racial discrimination the immediate effect of redlining was that residents in these areas couldn t access credit to buy or improve their housing however the long term effects of redlining persist 9housing discrimination and lending discrimination are illegal 10 if you think you ve been discriminated against based on race religion sex marital status use of public assistance national origin disability or age you can file a complaint with the consumer financial protection bureau cfpb or the u s department of housing and urban development hud 1112the objective of the community reinvestment act was to strengthen existing laws requiring banks to sufficiently address the banking needs of all members of the communities they served three federal regulators the office of the comptroller of the currency occ the federal deposit insurance corporation fdic and the federal reserve board share oversight of the cra however the last is chiefly responsible for assessing whether state member banks are fulfilling their obligations under the law 13cra performance rankingthe federal reserve uses one of five methods to rank a bank s performance based on its size and mission though a 1995 update to the cra requires regulators to consider lending and investment data the evaluation process is somewhat subjective with no specific quotas that banks have to satisfy 14 still each bank is given one of the following ratings 15the fdic maintains an online database where the public can see a particular bank s score additionally banks are obliged to provide consumers with their performance evaluations upon request the cra applies to fdic insured depository institutions including national banks state chartered banks and savings associations however credit unions backed by the national credit union share insurance fund and other non bank entities are exempt from the legislation 16criticisms of the cracritics of the cra including some conservative politicians and pundits allege the law contributed to the risky lending practices that led to the financial crisis of 2008 they contend that banks and other lenders relaxed certain standards for mortgage approvals to satisfy cra examiners 17however some economists including neil bhutta and daniel ringo of the federal reserve bank argued in 2015 that cra based mortgages represented a small percentage of the subprime loans issued during the financial crisis as a result bhutta and ringo concluded the law was not a major factor in the housing market s subsequent downturn 18the cra has also received criticism that it has not been particularly effective though low and moderate income communities saw an influx of loans after the cra s passage research by the federal reserve s jeffrey gunther concluded that lenders not subject to the law that is credit unions and other non banks represented an equal share of those loans 19modernizing the cramore recently some economists and policymakers have suggested the law needs to be revised to keep up with changes in the industry and make the evaluation process less onerous for banks for example the physical location of bank branches remains a component in the scoring process even though an increasing number of consumers are conducting their banking online in a 2018 op ed piece former comptroller of the currency joseph otting asserted that the cra s outdated approach had led to investment deserts where cra activity often fails to reach by preventing banks from receiving consideration when they want to lend and invest in communities with a need for capital 20the office of the comptroller of the currency in may 2020 issued a final rule to strengthen and modernize existing community reinvestment act regulations according to a news release the proposed changes received more than 7 500 comments from stakeholders in response to the notice of proposed rulemaking announced on dec 12 2019 21critics such as the national community reinvestment coalition said the new rule would reduce banks public accountability to communities by limiting consideration of bank branches and bank deposit accounts in communities 2223 but otting said it strengthened and modernized the law saying the final rule increased credit for mortgage origination to promote affordable mortgage availability in lower and moderate income areas 24however in december 2021 the occ rescinded the june 2020 rule to be replaced with a rule designed jointly by the occ federal reserve and fdic 25 on may 5 2022 the agencies jointly proposed a new rule intended to account for the ubiquity of online banking and distribute reinvestment more broadly across the country 26in 2023 the office of the comptroller of the currency the federal reserve board and the federal deposit insurance corporation issued a final rule to modernize regulations implementing the cra the final rule focuses on eight key objectives including strengthening the cra s core purpose adapting to changes in the banking industry promoting transparency and ensuring consistency in regulatory approaches 27