CRA and the intersection of geography and race

Many of NHC’s members remain hard at work on their comment letters in response to the Federal Reserve Board’s Advance Notice of Proposed Rulemaking (ANPR) on the Community Reinvestment Act (CRA), which is due on Feb. 16. One of the most interesting and groundbreaking of the nearly 100 questions posed by the Fed is Question 2: “In considering how the CRA’s history and purpose relate to the nation’s current challenges, what modifications and approaches would strengthen CRA regulatory implementation in addressing ongoing systemic inequity in credit access for minority individuals and communities?” It seems like a fairly anodyne question, but despite the CRA being written to address the impact of redlining, race has never been a direct part of a CRA examination. Instead, proxies for race, like low- and moderate-income households and census tracts have been relied upon, while “community” has been defined strictly in geographic terms. Now the Fed is asking how, after 44 years, do we address the foundation of CRA – racial equity.

CRA stands at the intersection of geography and race. When enacted in 1977, the CRA responded to concerns over disinvestment in low-income communities and the persistent impact of “redlining,” the practice of avoiding investment in minority neighborhoods codified by the Home Owners’ Loan Corporation (HOLC) in 1933 and the Federal Housing Administration in 1934. While the Fair Housing Act of 1968 prohibited redlining and other forms of housing discrimination, these practices proved difficult to reverse. Its impact has left deep scars in communities that persist more than a half century since the practice was outlawed. Research by economists at the Federal Reserve Bank of Chicago as recently as 2018 demonstrates that areas denied credit in the aftermath of the Great Depression continue to have lower property values, homeownership rates, and credit scores nearly 90 years later.

Non-White households’ access to affordable home mortgage loans today falls far short of what community advocates and legislative champions originally envisioned. Overall, Black homeownership plummeted during the Great Recession, falling from 49.7% in Q2 2004 to 40.6% in Q2 2019, when it was lower than it was when the Fair Housing Act was passed in 1968. This is a national tragedy. And Black and Hispanic households who have managed to become homeowners pay higher mortgage rates than their White counterparts and are at much greater risk of losing their homes during the pandemic.

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