Community Reinvestment Act

Community Reinvestment Act (CRA)

Enacted by Congress in 1977, the CRA encourages banks to help meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe and sound operations.

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Community Reinvestment Act

A 1977 U.S. law encouraging banks and other lending agencies to extend credit to low and moderate income persons wishing to buy a home. The original contained no penalties, but prohibited lending institutions from discriminating against a potential homeowner based on where he/she lives. Regulatory changes in 1995 and legislative amendment in 1999 are often blamed for encouraging banks to make excessively risky loans in exchange for the ability to offer investment and insurance services. Because of this, some believe the CRA is responsible for the housing bubble that contributed to the recession that began in 2008. See also: Credit Crunch, Gramm-Leach-Bliley Act

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Community Reinvestment Act (CRA)

An act passed by Congress in 1977 to encourage financial institutions to meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods. Compliance is monitored via regular audits,and a poor record of CRA compliance is taken into consideration when the financial institution applies for deposit facilities,including mergers and acquisitions.

One may find a financial institution's rating for CRA compliance by visiting the Web sites of the various regulatory agencies that track compliance.A financial institution may appear on one list but not others, depending on which agency has responsibility for that bank and its CRA compliance. The possibilities are

Federal Reserve Board (www.federalreserve.gov)
FDIC (www.fdic.gov)
Office of Comptroller of the Currency (www.occ.treas.gov)
Office of Thrift Supervision (www.ots.treas.gov)