Ethan Riley
The CRA, or Community Reinvestment Act, is a federal law enacted in 1977 that encourages banks to meet the credit needs of the communities in which they operate, including low- and moderate-income (LMI) neighbourhoods. The CRA has faced some criticism, with some arguing that it contributed to risky lending practices that played a role in the 2008 financial crisis. However, economists have argued that CRA-based mortgages represented a small percentage of subprime loans issued during the financial crisis, and thus the law was not a major factor.
| Characteristics | Values |
|---|---|
| Full Form | Community Reinvestment Act |
| Year | 1977 |
| Purpose | Encourage banks to meet the credit needs of the communities in which they operate, including low- and moderate-income (LMI) communities |
| Supervising Agencies | Federal Reserve System (FRS), Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC) |
| Ratings | Available online and upon request at local bank branches |
| Qualifying Activities | Investments in community services such as affordable housing and child care, revitalization of distressed geographies or designated disaster areas, and promoting economic development by providing financing to small businesses or farms |
| Categories of Banks | Small, intermediate-small and large |
| Other Institutions | Wholesale and limited-purpose institutions |
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What You'll Learn
The Community Reinvestment Act (CRA)
Banks' responsibilities regarding the CRA depend on their asset size, with the CRA categorizing banks as small, intermediate-small, and large, as well as distinguishing between limited-purpose and wholesale institutions. To receive credit under the CRA, loans, investments, and services made by banks must have the primary purpose of improving the circumstances for low- and moderate-income families or individuals and stabilizing or revitalizing their neighbourhoods. Activities that support community development according to the CRA include investments in community services such as affordable housing and child care, revitalization efforts in distressed areas, and promoting economic development by providing financing to small businesses or farms. CRA performance ratings are available online and upon request at local bank branches, with the most recent update to CRA regulations introducing a metrics-based approach for evaluating bank performance.
CRA examinations conclude with a written evaluation of the institution's record of meeting the credit needs of its assessment area, which is made publicly available. This evaluation generally contains conclusions regarding the financial institution's CRA performance, including the facts, data, and analyses used to form such conclusions. The CRA also requires certain information to be maintained in a public file, which must be updated as of April 1 of each year, including all public comments received for the current year and the prior two calendar years. CRA ratings are considered when banks request to merge with other financial institutions or plan to expand to other locations.
The CRA has undergone substantial revisions since its enactment, with revisions made in May 1995 and August 2005. The latest regulations, which introduce a metrics-based approach, will go into effect on January 1, 2026, with data reporting requirements going into effect on January 1, 2027.
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CRA-qualifying activities
The CRA, or the Community Reinvestment Act, was enacted in 1977 to encourage banks to meet the credit needs of the communities in which they operate, including low- and moderate-income (LMI) communities. The CRA is implemented by Regulation BB.
Banks' CRA-related responsibilities are contingent on their asset size, and the CRA categorizes banks as small, intermediate-small, or large. CRA examinations result in written evaluations of the institution's performance, which are publicly available. These evaluations consider the facts, data, and analyses used to assess the institution's record of meeting the credit needs of its community.
The CRA Qualifying Activities Confirmation Request process allows banks to request a review from the OCC to verify whether an activity qualifies under the CRA. This process involves submitting a separate form for each activity, with relevant supporting documentation, via email or mail. It's important to note that confirmation of an activity for CRA purposes does not determine its legal permissibility, and financial institutions must ensure that any activity is legally permissible before engaging in it.
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CRA performance ratings
CRA stands for the Community Reinvestment Act, enacted in 1977. The CRA encourages banks to meet the credit needs of the communities in which they operate, including low- and moderate-income (LMI) neighbourhoods. CRA performance ratings are considered when banks request to merge with other financial institutions or plan to expand to other locations. The CRA also distinguishes limited-purpose and wholesale institutions.
The CRA ratings and overall performance evaluations are made available to the public. Upon conclusion of CRA examinations, examiners must prepare a written evaluation of the institution's record of meeting the credit needs of its assessment area. This written evaluation is public information and can be obtained through the institution or its supervisory agency. The public portion of the evaluation generally contains conclusions regarding the financial institution's CRA performance, including the facts, data, and analyses used to form such conclusions.
The FFIEC Interagency CRA Rating Search engine enables users to find the latest CRA ratings of financial institutions supervised by the Federal Reserve, Office of the Comptroller of Currency, Federal Deposit Insurance Corporation, and/or Office of Thrift Supervision. The information at this site is updated quarterly, and users can obtain the most recent rating for a bank or thrift by visiting the website of the supervisory agency.
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CRA examinations
CRA stands for the Community Reinvestment Act, which was enacted in 1977 to encourage banks to meet the credit needs of the neighbourhoods in which they operate, including low- and moderate-income (LMI) communities. The CRA is implemented by Regulation BB.
The CRA examination process involves assessing the institution's capacity, constraints, business strategies, competitors, and peers, as well as the community's demographic and economic data, and lending, investment, and service opportunities. Examiners must prepare a written evaluation of the institution's CRA performance, including facts, data, and analyses, which is made available to the public.
The CRA examination procedures are outlined by the Federal Financial Institutions Examination Council (FFIEC), which provides instructions for writing public evaluations. The FFIEC also defines the asset-size thresholds used to categorise banks as small, intermediate-small, or large under the CRA regulations.
The OCC releases a list of national banks to be examined under the CRA in the next two calendar quarters, allowing interested parties to file public comments about the banks' performance. The OCC considers all public comments received before the close of the CRA examination in its evaluation.
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CRA and fair housing laws
The Community Reinvestment Act (CRA), enacted in 1977, requires federal regulators to encourage financial institutions to meet the credit needs of the communities in which they operate, including low- and moderate-income (LMI) neighbourhoods. The CRA was enacted by Congress in 1977 and is implemented by Regulation BB. The Federal Reserve System (FRS), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) are the three federal banking agencies responsible for the CRA. Banks that have CRA obligations are supervised by one of these three regulators.
The CRA aims to ensure that banks are not engaging in "redlining", or refusing to invest in areas often populated by minorities and lower-income earners. To receive credit under the CRA, banks' loans, investments, and services must primarily improve the circumstances for LMI families or individuals and stabilize or revitalize their neighbourhoods. Activities that support community development according to the CRA include investments in community services such as affordable housing and child care, revitalization of distressed areas, and promoting economic development by providing financing to small businesses or farms.
Fair housing laws, such as the Fair Housing Act (FHA) established in 1968, prohibit discrimination in most housing-related activities, including buying, selling, renting, or financing, based on race, colour, sex, national origin, religion, disability, or familial status. The FHA is enforced at the federal level by the U.S. Department of Housing and Urban Development (HUD), which provides information on what constitutes discrimination and how individuals can proceed if they feel they have been discriminated against. State laws can enhance the protections under the FHA but cannot reduce them. Various state and local jurisdictions have added specific protections, such as protections for sexual orientation in New York.
While the CRA focuses on encouraging banks to meet the credit needs of LMI communities, fair housing laws aim to protect individuals from discrimination in housing-related activities. Both the CRA and fair housing laws contribute to ensuring equal opportunities in housing and promoting inclusive financial services.
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Frequently asked questions
CRA stands for the Community Reinvestment Act.
The Community Reinvestment Act is a federal law enacted in 1977 that encourages lenders to meet the credit needs of the communities in which they are located, including low- and moderate-income (LMI) neighbourhoods.
Activities that support community development according to the CRA include investments in community services such as affordable housing and child care, revitalisation of distressed geographies or designated disaster areas, and providing financing to small businesses or farms.
CRA classifies low-income geographies as those with a median family income of less than 50% of the area median income. Moderate-income geographies are defined as those with a median family income of at least 50%.
CRA performance ratings are available online and upon request at local bank branches. You can also refer to the CRA Qualifying Activity Confirmation Request page to search for national banks' CRA ratings.
