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Community Reinvestment Act


Issue Background: Community Reinvestment Act

The Community Reinvestment Act (CRA; Public Law 95-128) imposes an affirmative obligation on financial institutions to help meet the credit needs of the communities in which they operate. The law was passed in 1977 to address the growing problem of banks providing little or no credit services to low-income and minority neighborhoods, a practice known as redlining.

The CRA applies to all banks and thrifts and is enforced by the federal bank regulatory agencies including the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation. Each regulator periodically conducts exams of banks under its jurisdiction. The CRA exams evaluate a bank’s investments, lending history and services provided. The bank is then assigned an overall rating of substantial noncompliance, needs improvement, satisfactory or outstanding. A bank must receive at least a satisfactory rating in order to engage in new activities such as mergers, expansions or consolidations.

Over the years, the CRA has spurred tremendous bank involvement in community development. Low- and moderate-income communities represent viable and valuable lending and investment opportunities. The CRA has given financial institutions the incentive to invest in public-private partnerships with local governments, community development corporations, and Community Development Financial Institutions. These partnerships then invest in economic development projects, affordable housing, and other amenities that improve neighborhoods.

Legislative and Regulatory Priorities

Enterprise’s supports a consistent, transparent CRA rating system that properly gives banks credit for sound community development work. It is important to update the CRA regulations to reflect the changes that have swept through the financial services industry in recent decades.

To that end, Enterprise specifically recommends:

  • The creation of a new "community development test" to replace the investment test. The time and complexity required by community development projects needs to be recognized by a separate test that looks at community development as an integrated whole. CRA exams should consider both the dollar value of the activity as well as the extent of the financial institution’s efforts to meet community development needs, consistent with safe and sound lending.
  • The inclusion of green building as an additional factor for CRA credit. Financial institutions should receive extra consideration if the housing or commercial developments financed in a low- or moderate-income area are energy efficient and built according to industry standards such as the Enterprise Green Communities Criteria.
  • Consistent, favorable treatment of Low Income Housing Tax Credit (Housing Credit) investments in national funds. CRA is an important driver of financial institution investment in the Housing Credit program. However, investments in national funds that invest outside of the bank's assessment areas are currently ineligible to receive CRA credit. This has had a serious and distorting impact on the Housing Credit market. Enterprise and industry allies have proposed a series of changes to provide more geographic balance to Housing Credit investment.

Enterprise offered these recommendations as part of its testimony at the aforementioned 2010 field hearings in Arlington, Va. and Los Angeles.

Publications and Resources

Previous CRA-Related Legislative Proposals (111th Congress)

Enterprise Resources Principles for Updating the Community Reinvestment Act (CRA)

CRA Treatment of LIHTC Investments

August 31, 2010, Enterprise joint comment with the Affordable Housing Tax Credit Coalition (AHTCC), Affordable Housing Investors Council (AHIC), the Local Initiatives Support Corporation (LISC), Opportunity Finance Network (OFN), Housing Partnership Network (HPN), Stewards of Afforable Housing for the Future (SAHF) and the National Housing Trust (NHT) on reducing disparities in LIHTC pricing and investment demand between large metropolitan markets and the rest of the country.

CRA Credit for NSP Activities

July 23, 2010, former Vice President, Public Policy and Government Relations Adrienne Quinn comment on consideration of Neighborhood Stabilization Program (NSP) Activities for Community Reinvestment Act (CRA) credit, submitted to the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve, Federal Deposit Insurance Corporation and Office of Thrift Supervision.

Coalition Urges Regulators to Improve, Strengthen CRA

On December 15, 2009, a coalition of 19 housing and community development groups sent a letter “to urge the Federal Financial Institutions Examinations Council (FFIEC) to send a clear message that CRA-related lending, services and investments are a core responsibility, consistent with the safe, sound, and responsible operation of financial institutions.” The FFIEC consists of the FDIC, Office of Thrift Supervision, Federal Reserve Board, and Office of the Comptroller of the Currency.

External Resources