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Understanding the Community Reinvestment Act

December 4, 2020 | by Katie Claflin

Categories: Affordable Housing, Lending

The Community Reinvestment Act, or CRA, was enacted in 1977 to encourage lenders to meet the credit needs of the communities in which they operate, including low and moderate-income (LMI) communities. 

Originally enacted to combat redlining, the CRA still plays a vital role in helping ensure banks continue to meet the needs of everyone they serve, regardless of income or neighborhood location.

There are three agencies responsible for ensuring banks’ compliance with the CRA: the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).  Known as CRA “regulators”, these agencies periodically examine each bank thoroughly to test how responsive they are to the needs of LMI households and communities. 

The OCC oversees national banks, while the Federal Reserve and FDIC oversee state-chartered banks. A full list of the banks regulated by each agency can be found here.

Activities that qualify for CRA credit include mortgage, retail, and student loans to LMI households; investments in affordable housing; and grants and loans to nonprofits serving LMI households and communities.  Click here for list of CRA eligible activities.

Banks that do not receive a passing rating on their CRA exam are restricted from certain activities, including opening new branches and acquiring or merging with another bank.  CRA ratings are also publicly available, so banks that score poorly are subject to public scrutiny.

Important CRA Updates

The regulators periodically update and modernize CRA requirements to ensure the CRA is responsive to industry trends. In 2019 the regulators began an extensive modernization process. The last time the CRA underwent updates this significant was 25 years ago. Click here to learn more about this process. 

It’s important for affordable housing providers and nonprofits to understand these updates to identify potential impacts to their programs and funding. While the regulators were aligned in previous updates, this time the regulators have opted to undergo separate modernization processes.

In May 2020, the OCC finalized issued a “final rule” outlining its updates to the CRA exam process and the lists of activities that qualify for CRA credit. Only banks regulated by the OCC are affected by these changes. The OCC adopted these changes after a lengthy public comment period.  Click here for an overview of these changes.  

While the FDIC initially planned to align its changes with those implemented by the OCC, due in part to COVID-19, the agency ultimately opted not to implement any changes at this time.

The Federal Reserve is also taking steps to update its CRA exam process for banks that it regulates.  The Federal Reserve issued a draft of its proposed changes in September 2020 and is accepting public comment on these changes until February 16, 2021Click here to review these changes and submit public comment.

If you are interested in learning more about the effort to modernize the CRA, we recommend the following resources:

National Alliance of Community Economic Development Associations (NACEDA)

National Community Reinvestment Coalition


On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.

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