Brighter Futures Begin with HOPE.

HOPE Submits Public Comment on Updates to the Community Reinvestment Act

August 9th, 2022

By Sara Miller, Senior Policy Analyst

The Community Reinvestment Act (CRA) has been a critical, though imperfect, tool for HOPE to leverage the resources it needs to serve low-income communities, rural communities, and communities of color in the Deep South. Rooted in our experiences in serving communities that are frequently underserved by banks and our experience in leveraging the CRA to advance this work, HOPE seeks to strengthen the CRA and its ability to significantly increase banks’ lending, services, and investments in our region.

The Community Reinvestment Act of 1977 was intended to address the long-term effects of redlining and to ensure banks adequately serve the communities in which they do business.  However, since its enactment, it has been implemented primarily on the basis of income rather than race.  Under the current rules, 98% of banks pass their CRA exams, despite the glaring racial inequities that persist in access to capital for communities of color, people of color, and businesses owned by people of color.

Through the CRA, one of three regulatory agencies, including the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation evaluate the banks on how they are serving their whole communities. That includes those in low-income areas and communities of color, with lending and retail services, such as home-mortgage loans, small-business lending and community-development activities.

In May the three bank regulating agencies released a joint rule for the first major update to the CRA since 1995.  In a public comment recently submitted to those CRA administering agencies, HOPE recommended several ways the joint rules should be amended to fulfill the promise of the CRA in underserved areas.

Key recommendations in HOPE’s comment include:

  • Race should be included in the specific metrics by which banks are evaluated for CRA purposes
  • HOPE strongly supports the creation of assessment areas in addition to those where banks are physically located. However, changes in bank size thresholds mean that a relatively small number of banks in our area will be subject to the assessment area expansion.
  • Changes in bank size thresholds would mean that many more banks in our areas would be exempt from evaluation of their community development activities.
  • Impact review factors should be meaningfully scored with weighting for the most impactful investments, like investments in Minority Depository Institutions.
  • Evaluation of the impact of investments in certain geographic areas like persistent poverty areas, should be sufficiently defined with multiple factors to target the communities most in need of investment.
  • Investments in CDFIs should be prioritized by type of investment as well as by the people and places those CDFIs have a track record of serving.

The modernization of the CRA should significantly expand bank lending, services and investment in low-income communities and communities of color. In addition to increasing the amount of bank activity, a reformed CRA must also ensure these investments actually reach people and communities that have both been historically underserved and divested of their resources.

HOPE’s full comment is available here.

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