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Arlington, Va. — UNC Center for Community Capital research comparing affordable and Community Reinvestment Act (CRA) mortgages to those made by subprime market players was cited during testimony before a joint panel of regulators today (July 19) on how to make CRA more effective.

Sarah Rosen Wartell, executive vice president of the Center for American Progress Action Fund, drew on center research findings in her testimony, “Making the Community Reinvestment Act More Effective,” before members of the board of governors of the Federal Reserve System, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and the Office of Thrift Supervision.

Wartell urged regulators to “conceive of their responsibility in CRA regulatory reform as ensuring that CRA will be a robust tool for protecting against the looming danger of further disinvestment and remain a lever to bring the creative talents, acumen and capital of our financial institutions to bear in rebuilding strong, sustainable communities.”

She cited results from UNC Center for Community Capital research that show clearly that CRA lending did not cause the financial crisis, dispelling the notion made by some critics that it did. In their study, center researchers compared the performance of loans from a large, national portfolio of affordable and CRA mortgages to that of subprime loans. The results showed that when matching borrowers with similar profiles (for example, comparable borrower risk factors, down payment and market conditions) the borrowers who obtained subprime loans were three to five times as likely to default as their counterparts who instead had received the prime, affordable mortgages. That is because they contain features, such as adjustable rates, prepayment penalties and broker originations, which layered together typically increase default risk.

“You have a genuine opportunity and responsibility before you to look at the broader context of hard-hit communities in the aftermath of the recent housing and financial crisis,” Wartell said. “As the flow of private capital does return — albeit slowly — it will be even slower to reach these communities. Regulators and policymakers must ensure CRA becomes a more robust tool to ensure all of our communities rebuild and address the long-term economic challenges they face.”

The complete text of Wartell’s testimony may be found at 

Homeownership finance is a key area of focus 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, Mortgage Finance, Other, Testimony
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