Paying More for the American Dream III

A joint report released yesterday by a multi-state collaboration of regional research, policy, and advocacy organizations underlines the critical role that the Community Reinvestment Act (CRA) plays in promoting safe, affordable lending to lower-income borrowers and communities.   It finds that in all the cities studied, lenders with CRA obligations were responsible for much smaller shares of high-cost lending to lower-income borrowers and neighborhoods than were other lenders.

The report, Paying More for the American Dream III: Promoting Responsible Lending to Lower-Income Communities and Communities of Color, is available on the websites of the California Reinvestment Coalition, the Community Reinvestment Association of North Carolina, the Empire Justice Center, the Massachusetts Affordable Housing Alliance, the Neighborhood Economic Development Advocacy Project, and the Woodstock Institute.

Because the CRA applies only to bank lenders — and to them only in areas where they have bank branches — it is possible to compare the lending patterns of lenders who are and who are not covered by the law.   The report examines the impact of the CRA in seven metropolitan areas across the country: Boston, Charlotte, Chicago; Cleveland, Los Angeles, New York City, and Rochester, NY.

The report contributes to the growing body of evidence that counters the baseless charges from the right that the CRA, by forcing banks to make unaffordable loans to undeserving borrowers, was a major contributor to the mortgage meltdown.   The problem, in fact, was just the reverse: it was lenders without CRA obligations or oversight that made the overwhelming majority of the abusive subprime loans that lay at the root of current crisis.

The groups releasing the report call for expanding the CRA to cover all mortgage lenders, everywhere that they make loans.   We’ll keep you posted as Congress turns to this issue in the coming months.

Full disclosure: I was one of the report’s co-authors, representing the Massachusetts Affordable Housing Alliance (MAHA) where I am a long-time board member.