In 1976 Gale Cincotta announced the formulation of new policy that ultimately became the Community Reinvestment Act (CRA). Passed in 1977, the Community Reinvestment Act (CRA) was intended to encourage banks and other financial institutions to lend to lower-income individuals in their communities.
The Community Reinvestment Act of 1977 is defined as a "United States federal law designed to encourage commercial banks and savings associations to help meet the needs of the borrowers in all segments of their communities, including low and moderate-income neighborhoods."
The original criteria were qualitative and focused primarily on the lending process, rather than on lending outcomes, which may have limited the Act’s impact initially (Avery, Calem, and Canner 2003).In addition to discrimination, others factors inhibiting lending in LMI neighborhoods included a shortage of data on appraisals and credit histories of LMI borrowers. The Community Reinvestment Act of 1977. Which of the following factors affected the US economy during the 1970s? It also would not insure loans for older homes, which further discriminated against minority borrowers since racial deed covenants prohibited them from moving into newer neighborhoods. Banks were reluctant to issue loans without FHA insurance, since eligibility for federal deposit insurance (introduced with the creation of the Federal Deposit Insurance Corporation in 1933) required banks to engage in safe and sound lending practices. 1. They also noted an already heavy regulatory burden, and felt the CRA would encourage riskier lending.To implement the Act, the regulatory agencies originally developed 12 assessment criteria to evaluate how banks ascertained and responded to the credit needs of their communities, and assigned banks a rating based on how they met these criteria. Community Reinvestment Act: states that banks must meet the needs of the community in which they are charactered to do business. But the FHA would not insure loans for homes in neighborhoods with “incompatible” or “undesirable” racial or ethnic groups. The Community Reinvestment Act of 1977 succeeded in reducing discrimination against borrowers. There is some evidence that CRA lending standards were relaxed in the mid-1990s; however, the bulk of defaulted mortgages during the foreclosure crisis were originated between 2004 and 2007.
The Community Reinvestment Act of 1977: Its Legisla-tive History and Its Impact on Applica-tions For Changes In Structure Made by Depository Insti-Effective January 1, 1996, the federal financial supervisory agencies (agencies) implemented their new Community Rein-vestment Act (CRA) regulation.1 Initially, examiners will use the revised regulation Featuring: The Community Reinvestment Act (CRA, P.L. Has the CRA succeeded in this goal or is there room for improvement? She propounded the notion that it was immoral for banks to take the deposits of people in one community and lend them for investment in another community. The next year, Congress passed the Home Mortgage Disclosure Act, which required banks to disclose the location of the property financed and the race and gender of borrowers, among other provisions. Initially, community groups needed help navigating the administrative process of filing a protest if they believed a bank’s practices had discriminatory effects. In 1974, Illinois became the first state to pass a law requiring banks to disclose their lending practices and prohibiting redlining, and several other states soon followed suit.
The next year, Congress passed the Home Mortgage Disclosure Act, which required banks to disclose the location of the property financed and the race and gender of borrowers, among other provisions.
§ 2901 et seq.) The National Housing Act of 1934 created the Federal Housing Administration (FHA) to provide government-funded insurance on mortgages originated by banks.
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