NPA and NCRC Urge Frank to Support Community Reinvestment Act

NPA and NCRC delivered a letter signed by more than 260 organizations to Rep. Barney Frank, Chairman of the House Financial Services Committee, urging that he introduce and pass Community Reinvestment Act reform this year.  AFR signed on to this letter.  Click here to read the letter on NCRC’s website and see the full sign-on list.

Dear Chairman Frank:

First, we would like to congratulate you and thank you for your leadership in enacting financial regulatory reform that will go a long way towards leveling the playing field for consumers, increasing the safety and soundness of our financial system and helping to curb the worst abuses that caused the economic collapse. We want to thank you in particular for including enhancements to the Home Mortgage Disclosure Act and small business lending data in financial reform.

We are writing you today to ask you to continue your leadership by moving forward with the introduction and passage of Community Reinvestment Act (CRA) modernization legislation. For many months communities, advocates, and your colleagues in Congress have been told that the introduction of comprehensive CRA reform is coming. It is now time for CRA reform to begin moving forward in earnest.

As you are aware, the four bank regulators have begun the process to modernize the regulations of CRA by scheduling hearings that began in July. We thank you for your support and work to ensure that this process was started, including your participation at the Brockton, MA Federal Reserve field hearing, one of 9 hearings the PICO National Network and National People’s Action organized last year.   While we welcome this and will be working with the regulators to ensure the most effective update possible, we know that regulatory changes alone are not enough. To begin with, there is no guarantee regulators will make adequate changes to CRA. We think the passage of a bill in the House would spur the federal bank agencies to make better changes to the CRA regulation. There is also the danger that with a new crop of regulators, under a future administration, we might lose much of what we gained.

There are also substantial inadequacies in the law itself that can only be addressed through legislation. For example, due to changes in the marketplace over the last two decades, CRA does not apply to the bulk of mortgages and lenders in the country. Applying CRA to mortgage companies and mainstream credit unions is absolutely essential and can only be achieved through a change in the underlying law.  It is worth remembering that, at the height of the housing bubble, only 6% of high-cost loans – the irresponsible lending that led to the melt-down – were made by the CRA covered lenders. Had CRA been applied to all lenders, it is likely that many of the worst abuses could have been curbed or avoided altogether.  Moreover, applying CRA to additional institutions such as investment banks and insurance companies will leverage substantial investments and other financial products for communities of color and low- and moderate-income communities.

As pivotal a tool as CRA can be in preventing the next crash, equally crucial is the role an updated CRA will play in rebuilding the neighborhoods and businesses decimated by the Great Recession.  CRA has brought billions of dollars of investment to our nation’s communities.  We see now, more than ever, the need for such investment in neighborhoods devastated by foreclosure and reeling from job losses brought on by inaccessible small business credit. America needs capital and investment now, and a modernized CRA can spur our financial system to provide it.

We, and the thousands of community leaders we represent, are committed to working with you, the members of your Committee, Congress as a whole and the Administration to make the passage of effective CRA reform a reality this year.  We look forward to seeing legislation introduced and votes scheduled quickly.