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Washington, D.C. — The Federal Reserve Banks of Boston and San Francisco today (Feb. 18) released a new publication, Revisiting the CRA: Perspectives on the Future of the Community Reinvestment Act . It offers a range of perspectives on the past and future of the CRA, provides facts and highlights possible reforms.

The authors include academic researchers, current and former regulators, community development practitioners and financial services representatives. Among them is the UNC Center for Community Capital and founder Michael A. Stegman, now director of policy for the Program on Human and Community Development at The John D. and Catherine T. MacArthur Foundation.

In their article, The CRA: Outstanding, and Needs to Improve , the center’s researchers recommend keeping the CRA intact with some refinements, leveling the regulatory playing field and expanding public oversight. They provide evidence from the mortgage lending and consumer-financial services arenas that suggest that a case of “too little CRA” has resulted in dual financial systems, with a separate but unequal system serving many lower-income and minority markets.

“The CRA should be seen as a way to encourage the pursuit of long-term, broad-based strategies for successful and profitable community investment, versus short-term profits that may come at the expense of the broader community,” center researchers write. “If the CRA can be refined and adapted to the current market context in order to emphasize the former and discourage the latter, it can better fulfill its potential for positive impacts on both communities and institutions.”

The CRA, enacted in 1977, has come under fire from critics who have blamed the act for the subprime mortgage crisis, write Eric Rosengren and Janet Yellen, both president and CEO, respectively, of the Federal Reserve Bank of Boston and Federal Reserve Bank of San Francisco.

“There is no empirical evidence to support the claim that the CRA is responsible for the crisis, as several authors in the volume make clear,” Rosengren and Yellen write. Rather, the CRA has fostered access to financial services for low- and moderate-income communities across the country. Together with other antidiscrimination, consumer protection and disclosure laws, the CRA remains today a key element of the regulatory framework, encouraging the provision of mortgage, small business, and other credit, investments and financial services in low- and moderate-income neighborhoods.”

The UNC Center for Community Capital is the leading center for research and policy analysis on the transformative power of capital on households and communities. The center’s in-depth analyses in the areas of mortgage finance, consumer financial services and community development finance help policymakers, advocates and the private sector find sustainable ways to expand economic opportunity to more people, more effectively. For more information, or call (919) 843-2140.

Topics(s): Affordable Homeownership, Mortgage Finance
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