Next City, April 30, 2019: New Orleans needs a stronger, not a weaker Community Reinvestment Act
The first time Andreanecia Morris remembers learning about the Community Reinvestment Act was at the Housing Authority of New Orleans, where she started her career in the mid-1990s. During her time there, the authority created its Section 8 Homeownership program, which allows families with rental assistance vouchers to convert them into mortgage assistance payments instead. But the housing authority still needed to convince banks to create a mortgage product that would be compatible with the Section 8 Homeownership program. It was the Community Reinvestment Act that brought banks to the table.
“They would get CRA credit for this,” Morris says. “That’s the kind of responsiveness [from banks] that you needed, the thoughtfulness in saying, ‘Listen, this isn’t a risk, it is to [our] benefit and [we’re] making a good investment’ — these are loans, not a gift to the homeowners.”
The CRA, a decades-old law meant to ensure banks meet the credit needs of the communities they serve, is in need of an update — both banks and community organizers agree. While 98% of banks get a passing grade on their CRA exams, it’s not always clear that their investments are actually benefiting locals. Yet today, there are federal regulators who want to gut the CRA — an effort CRA proponents have called “an attack on communities of color.”
What might seem like the CRA’s biggest flaw is also its saving grace — it’s actually very vague. It says regulated financial institutions have a “continuing and affirmative obligation to help meet the credit needs of the local communities in which they are chartered,” but it doesn’t specify a process for determining those credit needs. The law empowered federal regulators to do that, and over the decades that has been an evolving process that both banks and community organizers have characterized as inefficient and inadequate.
If a bank does fall short, regulators can deny proposed mergers or place growth restrictions on banks. The National Community Reinvestment Coalition and its grassroots partners have — by mobilizing to offer comments on CRA examinations or bank mergers — negotiated more than $82 billion in lending commitments from banks to low- and moderate-income areas over the past three years.