Research Paper

Modernizing the CRA (While Preserving Its Spirit)

December 13, 2019

Authors Susan Wachter

Current Themes

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Overview

This policy brief examines the need to modernize the Community Reinvestment Act (CRA) to better serve community needs in the 21st century while preserving its foundational goals. The CRA was enacted to combat redlining and ensure that banks meet the lending needs of the communities where they operate. This brief highlights the ongoing relevance of the CRA and proposes updates to enhance its effectiveness in a rapidly changing financial landscape.

Key Message

The CRA remains crucial in addressing persistent discrimination and disinvestment in historically redlined communities. Despite significant progress, recent research shows that neighborhoods previously redlined still experience lower economic mobility and higher default rates, indicating the need for continued CRA enforcement. The CRA has successfully increased lending to LMI communities, but its impact is limited by the growth of nonbank lenders not subject to CRA requirements.