The Future of the Community Reinvestment Act

On October 29, 2019, Penn IUR and the Wharton Public Policy Initiative convened a group of scholars and public- and private-sector leaders to discuss how to strengthen the Community Reinvestment Act (CRA), a federal law enacted in 1977 to combat redlining and discrimination in mortgage markets. The symposium featured two panel discussions: one presenting new research findings on the impact of the CRA and the other exploring proposed policy options intended to modernize this important legislation.

Much has changed, however, in the four decades since the law’s enactment. Challenges to implementing CRA regulations have arisen with the spread of newer forms of lending institutions such as national banks (which have branches across the country), nonbanks (which are not covered by the CRA), and FinTech companies (which usually have only one office, frequently in Salt Lake City). Second, gentrification has led to a crisis of affordable housing in many cities.

Given these and other developments, rule changes have been proposed to update the CRA for the 21st century. Senator Sherrod Brown of Ohio, who spoke at the symposium, expressed his hope that any changes to the CRA would reflect the spirit in which the law was originally adopted: as a tool to fight disinvestment in impoverished communities and as a key demand of the Civil Rights Movement.

The first panel discussion, moderated by Penn IUR Co-Director Susan Wachter and titled “CRA Impact—Recent Findings,” focused on recent research on the long-term outcomes of the legislation. Panel participants included Paul Calem, Bank Policy Institute, formerly Federal Reserve Bank of Philadelphia; Laurie Goodman, Urban Institute; and Mark Willis, New York University. The panelists agreed that the CRA has effected positive change by increasing investment in low- and moderate-income communities, but that it nevertheless has fallen short of its potential.

The second panel discussion, moderated by Kent Colton of the Colton Housing Group and titled “Policy Alternatives,” focused on proposed policy changes under consideration by federal officials. Panel participants included Gerron Levi, National Community Reinvestment Coalition; Pat McCoy, Boston College; Buzz Roberts, National Association of Affordable Housing Lenders; Dafina Stewart, Bank Policy Institute; and Lawrence J. White, New York University. The panelists debated various proposals to strengthen the CRA, including ways to improve data collection and transparency, expand the law’s limited application beyond banks with physical branches, and set clear standards for what activities count towards a bank’s CRA obligations. While the symposium participants reflected a range of viewpoints, there was broad agreement that the proposed rule change known as the “single metric” —which would dramatically restructure how regulatory agencies evaluate banks on their CRA obligations— risked going too far in the effort to streamline the lending process. Participants noted that a leaner CRA could fail to identify and meet local communities’ needs, leading to a decrease in lending and potentially exacerbating the affordable housing crisis.

Several of the panelists also contributed to a special issue of Housing Policy Debate, co-edited by Lei Ding and Susan Wachter, that delves deeper into the issues surrounding modernization of the CRA. To read these essays and expert papers written in response, visit https://penniur.upenn.edu/publications/the-future-of-the-community-rein….