Community Reinvestment Act
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The Community Reinvestment Act (or CRA) is an United States federal law that requires banks and Savings and loan associations to offer credit throughout their entire market area and prohibits them from targeting only wealthier neighborhoods with their services, a practice known as "redlining." The purpose of the CRA is to provide home ownership opportunities to underserved populations.
The CRA was passed into law in 1977 as a result of national grassroots pressure for affordable housing.
The CRA mandates that each banking institution be evaluated to determine if it has met the credit needs of its entire community. That record is taken into account when the federal government considers an institution's application for deposit facilities, including mergers and acquisitions.
Changes of September 2005
Despite continuing racial inequities in mortgage acceptance rates, as reported by Inner City Press, ACORN and other groups, banks regularly seek to weaken the Community Reinvestment Act. They succeeded in August of 2004, when the Federal Deposit Insurance Corporation proposed rules to weaken enforcement of the Act. Under the old system, all institutions with more than US$250 million in assets were subject to periodic review. However, as of September of 2005, only those institutions with more than $1 billion in assets will be subject to review.References
- Canner, G. and W. Passmore, 1997 The Community Reinvestment Act and the profitability of mortage-oriented banks, Finance and economics discussion series, 1997-7
- Schwartz, A., 1998. From confrontation to collaboration? Banks, community groups, and the implementation of community reinvestment agreements, Housing policy debate, 9, 3, pp. 631-662
- Seidman, E., 1999 "CRA in the 21st century," Mortage banking, Washington, DC, October
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