The Community Reinvestment Act did not cause the foreclosure crisis

Campaigns

We support reforms to the financial marketplace that protect consumers from unscrupulous banks and lenders.

By Consumers Union on Wednesday, November 26th, 2008

In response to suggestions that the Community Reinvestment Act (CRA) caused the foreclosure crisis and credit market crisis, Consumer Union, along with thirty other groups, issued a statement in October denouncing this as attempt to deflect attention away from the real problem affecting our financial system- failed regulatory policy and oversight. On November 19th, the head of the OCC (Comptroller of the Currency John C. Dugan) agreed in part by “categorically disagree[ing] with suggestions that the Community Reinvestment Act is partly responsible for the ongoing credit crisis.”

Though Comptroller Dugan’s statements do not allude to what he believes to be the cause of the crisis, he emphasizes how beneficial the CRA has been:

“During the community tours I have taken over the past three years, I personally witnessed the positive impact that CRA partnerships have had in transforming communities, expanding homeownership, and promoting job creation and economic development,” he said. “These partnerships between communities and financial institutions have also helped house senior citizens and people with special needs, built community facilities, and assisted small businesses serving low-income areas.”

In addition, Dugan’s statement reiterates a point made by the consumer groups that “the lenders most prominently associated with subprime mortgage lending abuses and high rates of foreclosure are lenders not subject to CRA.”

For more information about the CRA, explore this toolkit by the National Community Reinvestment Coalition. NCRC has also produced a short video to clarify CRA’s role and significance.

Leave a Reply

Your email address will not be published. Required fields are marked *