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A report released today by the UNC Center for Community Capital details flaws in the methodology and conclusions of a new paper seeking to discredit the Community Reinvestment Act, enacted in 1977 to encourage regulated financial institutions to meet the credit needs of their communities in a safe and sound manner.

Researchers urged policymakers and practitioners to resist being distracted by a widely rejected thesis promoted in a December paper issued by the National Bureau of Economic Research.

“The ‘blame the CRA’ story has been refuted by industry leaders and researchers time and time again,” authors said in their report, Debunking the CRA Myth – Again. “Rather than trying to place blame where none exists, we argue that the focus of the debate should be on how CRA can be modernized and improved to better reflect the current financial services landscape and meet the continuing credit needs of America’s communities.”

The UNC report outlines the extensive research – by UNC researchers, other academics and regulatory agencies, such as the Federal Reserve Board of Governors – that concludes CRA did not encourage risky lending during the subprime crisis.

Rather, research shows clearly that CRA encouraged safe and sustainable lending that expanded homeownership without incurring the high default levels experienced by the unregulated, non-CRA-covered loans, the UNC report said. Federal Reserve economists, for instance, demonstrated that only six percent of the high-cost, high-risk mortgages made at the height of the subprime boom were made by banks in their CRA-eligible markets.

The report was co-authored by Carolina Reid, assistant professor in the Department of City and Regional Planning at UC Berkeley with Mark A. Willis, resident research fellow, NYU Furman Center for Real Estate and Urban Policy, who led community development banking at JPMorgan Chase until 2008; Ellen Seidman, former director of the Office of Thrift Supervision; Lei Ding, assistant professor, Department of Urban Studies and Planning, Wayne State University; Josh Silver, vice president of research and policy, National Community Reinvestment Coalition; and Janneke Ratcliffe, executive director, UNC Center for Community Capital, University of North Carolina at Chapel Hill.

The complete research report is available online at

Housing finance is a key area of study for the UNC Center for Community Capital, the leading center for research and policy analysis on the transformative power of capital on households and communities in the United States. The center is part of the College of Arts and Sciences at the University of North Carolina at Chapel Hill. Its in-depth analyses help policymakers, advocates and the private sector find sustainable ways to expand economic opportunity to more people, more effectively. For more information, visit or call (919) 843-2140.


Topics(s): Affordable Homeownership, Housing Policy, Mortgage Finance
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