Last week Enterprise Community Partners’ CEO Terri Ludwig and President Laurel Blatchford submitted a comment letter to the Office of the Comptroller of the Currency (OCC) on possible streamlining of and enhancements to the Community Reinvestment Act (CRA). CRA was enacted in 1977 largely as a response to “redlining,” the discriminatory practice in which banks denied loans to residents living in neighborhoods that they deemed hazardous, often solely based on the presence of large minority populations. The law requires financial institutions to meet the credit needs of the communities in which they operate, including low- and moderate-income (LMI) communities. CRA has produced substantial benefits for these communities and their residents, particularly by helping drive financial institution investments in nonprofit organizations, the Low-Income Housing Tax Credit (Housing Credit), the New Markets Tax Credit (NMTC), Community Development Financial Institutions (CDFI), and other critical activities benefiting LMI communities and residents.
In August, the OCC released an advance notice of proposed rulemaking (ANPR) asking the public to submit comments on possible regulatory changes to CRA by November 19. Enterprise’s aim for modernized CRA regulations is to ensure a consistent, transparent system that properly gives banks credit for sound community development work. Our three principles for CRA modernization are: 1) preserving a focus on affordable housing, 2) updating assessment areas to address national lending and investment challenges, and 3) retaining an explicit investment test with an emphasis on community development activities. The OCC must now review the more than 1,200 public comment letters submitted on CRA modernization, after which the agency will likely issue a proposed rule for further public input. Typically, all three banking regulators – the OCC, Federal Reserve Board of Governors, and the Federal Deposit Insurance Corporation (FDIC) – move forward together on significant regulatory changes. It is yet to be seen whether the Federal Reserve and FDIC will join the OCC in subsequent steps of the regulatory process.