The Office of the Comptroller of the Currency (OCC) released an advance notice of proposed rulemaking (ANPR) last month seeking public comment on reforming the Community Reinvestment Act (CRA). An Enterprise post blog points out that a critical proposal in the ANPR involves creating a “ratio test” to rate banks’ CRA activity by comparing a bank’s total CRA-qualified investments against a measure of the bank’s capacity to lend (for example, total assets). This “simple ratio” proposal could significantly reduce the amount and type of investment in affordable housing and community development programs, since providing banks with an exact threshold – aggregate dollar amount rather than tests of specific activities – could disincentivize them from engaging in innovative activities or going beyond what is necessary to meet their CRA requirements.
Using data collected under the CRA and the Home Mortgage Disclosure Act (HMDA) from 2012 through 2016, the National Community Reinvestment Coalition (NCRC) analyzed the approximate impact of the CRA on both mortgage and small business lending in every community. The findings reveal that a loss of between 10 percent and 20 percent in loan volume for loans made in low- and moderate-income census tracts would mean, nationally, a loss of between $52 billion and $105 billion in loans made in those areas over five years.