NCRC Summary of the Section 203, Strengthening the Community Reinvestment Act of 1977, of the American Housing and Economic Mobility Act of 2021 (S. 1368, H.R. 2768)

Although the Community Reinvestment Act (CRA) and other fair lending laws have increased lending and investment in traditionally underserved communities, stubborn and persistent lending disparities by race and income remain. CRA needs an update and its coverage of the financial industry must be expanded. The overall objective of Section 203 is to increase lending, investments and bank services to traditionally underserved areas by improving the rigor of CRA as applied to banks, applying CRA to mortgage companies and increasing the public accountability of credit unions.

CRA has leveraged trillions of dollars but it could increase reinvestment if its coverage of banks and nonbanks was more comprehensive

By rating banks and holding them accountable for lending to and investing in low- and moderate-income (LMI) borrowers and neighborhoods, CRA has leveraged trillions of dollars for LMI communities. Since 1996, CRA-covered banks have made more than $2.5 trillion in small business and community development loans in LMI census tracts.[1] From 2009 through 2018, CRA-covered banks made more than $2.2 trillion in home loans to LMI borrowers or LMI tracts.[2] Without CRA, retail lending in LMI tracts would be 10% to 20% lower[3]; this impact makes a significant difference between a viable community and an economically distressed neighborhood.

Although impressive, the reinvestment would be higher if CRA was made more rigorous and comprehensive as Section 203 would do. The major provisions of this section include:

Strengthens CRA as applied to banks

Section 203 would make CRA more effective by expanding the geographical areas on exams, addressing racial disparities by including more underserved areas on exams, curbing CRA ratings inflation, requiring community benefits plans for merging banks, and improving public data disclosure.

  • Establish additional local assessment areas – Assessment areas are geographical areas on bank CRA exams. Currently, exams scrutinize lending in metropolitan areas and rural counties where bank branches are located. Banks, however, are increasingly lending beyond areas with branches. This provision would require CRA exams to include areas without branches where a bank has significant numbers of loans and/or deposits. The provision would require that at least 75% of a bank’s loans and/or deposits be covered by assessment areas. NCRC found that when coverage is less than 75%, CRA ratings inflation is more likely.[4]
  • Address racial disparities by adding underserved areas on CRA exams – The federal agencies would be required to define underserved areas based on low levels of retail lending and/or indicators of economic distress. These areas would be census tracts and counties. Exams would include an assessment of lending, investment and services in these areas. Many of these areas would include communities of color. NCRC estimates that home and small business lending would increase in communities of color by $10 billion over five years if the agencies adopted NCRC’s approach to identifying underserved communities.[5]
  • Combat CRA ratings inflation This provision would combat grade inflation by including a fifth rating category. Current exams have four ratings categories and more than 98% of banks score either Satisfactory or Outstanding, which are the two passing ratings.[6] This does not accord with reality where bank performance is more varied than is revealed by the skewed ratings system. In addition, the provision would allow agencies to include more nuance in the ratings system by allowing them to introduce a point scale that would accompany the ratings. If ratings were more accurate and identified more banks with lackluster performance, these banks would be motivated to increase their lending and investing in underserved communities. Overall, a more robust ratings system would increase reinvestment.
  • Require community benefits plans for merging banks – The bill would require merging banks to develop a community benefits plan with input from community organizations that would commit the banks to specific increases in loans, investments and services in underserved communities. After mergers, increases in reinvestment would be more likely if this provision was enacted.
  • Improves accountability through data disclosure requirements – The bill requires disclosure of community development financing including loans, investments and grants for affordable housing, economic development and community facilities. The bill also requires disclosures of consumer loans and customer deposits in low- and moderate-income tracts and in underserved areas. This data is to be used by the public and CRA examiners in increasing the accountability of banks for serving traditionally underserved communities.

Applies CRA to nonbank mortgage companies and increases the public accountability of credit unions

CRA’s coverage of lending and other financial transactions has been decreasing over several years due to a lack of coverage of nonbank companies that have a significant presence in the marketplace. The bill applies CRA to independent mortgage companies and bolsters the public accountability of credit unions, particularly large ones.

  • Mortgage companies would be covered by CRA – Independent mortgage companies made more than half of home loans over the last several years.[7] This bill would apply CRA to these companies in much the same way as the state of Massachusetts’ CRA law.[8] The mortgage companies would have a retail lending test and their community development financing and services would also be assessed.
  • Tighten up requirements for credit unions and hold public hearings in the case of large credit unions – The bill would improve the rigor of credit union requirements to meet needs in underserved areas and could rescind permission to add underserved communities to a credit union’s membership base if the credit union does not deliver on its plan for serving these communities. It would also require public hearings in cases of credit unions seeking to serve a geographical area of more than 2.5 million people.


By strengthening CRA as applied to banks and increasing its coverage of non-bank financial companies, Section 203 would increase lending and investment in traditionally underserved communities and would also address racial disparities in access to credit and capital. For a more detailed summary, contact Josh Silver, NCRC Senior Advisor, at jsilver@ncrc.org.



[1] NCRC’s calculations using data from the Federal Financial Institutions Examination (FFIEC) website, see https://www.ffiec.gov/craadweb/national.aspx

[2] NCRC data tool via https://www.ncrc.org/treasureCRA/

[3] Lei Ding and Leonard Nakamura, Don’t Know What You Got Till It’s Gone: The Effects of the Community Reinvestment Act (CRA) on Mortgage Lending in the Philadelphia Market, Working Paper No. 17-15, June 19, 2017,https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2991557, and Lei Ding, Raphael Bostic, and Hyojung Lee, Effects of the CRA on Small Business Lending, Federal Reserve Bank of Philadelphia, WP 18-27, December 2018,https://www.philadelphiafed.org/community-development/credit-and-capital/effects-of-the-community-reinvestment-act-cra-on-small-business-lending.

[4] Josh Silver, The Community Reinvestment Act and Geography: How Well Do CRA Exams Cover the Geographical Areas that Banks Serve?, NCRC, April 2007, pp. 9 and 10, https://ncrc.org/wp-content/uploads/2017/05/cra_geography_paper_050517.pdf

[5] Josh Silver and Jason Richardson, NCRC Proposal For Underserved Tracts Would Increase Lending In Communities Of Color By Billions Of Dollars, July 2020, https://ncrc.org/ncrc-proposal-for-underserved-tracts-would-increase-lending-in-communities-of-color-by-billions-of-dollars/

[6] Josh Silver and Jason Richardson, Do CRA Ratings Reflect Differences In Performance: An Examination Using Federal Reserve Data, May 2020, NCRC,

Do CRA Ratings Reflect Differences in Performance: An Examination Using Federal Reserve Data

[7] Jason Richardson, Preliminary Analysis Of 2019 HMDA Mortgage Lending Data, June 2020, NCRC https://ncrc.org/preliminary-analysis-of-2019-hdma-mortgage-lending-data/

[8] For information on Massachusetts’ CRA law, see https://www.mass.gov/community-reinvestment-act-cra

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