In New CRA Rule, Regulators Miss a Once-In-A-Generation Opportunity to Address Racial Homeownership and Wealth Gaps

FOR IMMEDIATE RELEASE
October 24, 2023
Contact: Janelle Brevard | jbrevard@nationalfairhousing.org

Washington, D.C. — Today, federal financial regulators adopted a new regulation to implement the Community Reinvestment Act, a law passed by Congress 46 years ago to end redlining in communities of color and other underserved communities. Nikitra Bailey, Executive Vice President of the National Fair Housing Alliance®, issued the following statement about the new CRA regulations:

“The National Fair Housing Alliance (NFHA™) is extremely disappointed regulators failed to use this rewrite of the CRA rules to tackle head-on the barriers to credit that Black, Latino and other people of color face in markets throughout the country. Although the regulators have a statutory obligation under the Fair Housing Act to promote fair housing, they failed to explicitly incorporate race into the CRA, which means that White communities, including low-income communities, will continue to have better access to fair and responsible mainstream financial services while communities of color will continue to be disproportionately locked out.

Courage and intentionality are needed to disrupt the status quo, and the status quo in our country’s banking system is in dire need of disruption. This rulemaking is a missed opportunity to reform the banking system to increase inclusivity and expand credit access in underserved communities of color, which benefits those communities and the economy overall. Banks have a special responsibility to provide fair access to all communities, as they receive special public benefits to do so. We urge banks not to use the regulators’ failure with this rulemaking as an opportunity to retreat from their responsibilities, but instead to double down on their efforts to serve their entire communities fairly, including communities of color.

CRA was designed to remedy redlining, which limits access to mainstream financial products for communities of color, perpetuates our country’s enormous and long-standing racial gaps in homeownership and wealth and undermines our collective prosperity. The recent announcement by the U.S. Department of Justice that it has reached more than $100 million in settlements in redlining cases is a stark reminder that redlining persists and underscores the importance of using all the tools at our disposal – including the CRA – to stamp it out. We also must not forget that the first round of $350 billion of the Paycheck Protection Program (PPP) went mostly to White-owned businesses as Black, Latino, Asian, and Native Americans had a greater than 90% chance of not securing a PPP loan because they did not have existing relationships with banks.

The new rule does acknowledge the benefits of using Special Purpose Credit Programs as a tool for increasing access to credit for communities of color, which is an important step forward. It maintains the crucial requirement that the regulators will generally count a referral to the Department of Justice as well as other evidence of a fair lending violation, in helping to determine a bank’s CRA rating. It also introduces new transparency on the income, race, and ethnicity for consumers and communities with respect to home loan originations in each of the bank’s assessment areas. However, this information will not cause independent action on conclusions or ratings and will not reflect any fair lending findings or violations. It also gives special consideration to the work of Community Development Financial Institutions (CDFIs); however, it lacks important guardrails for CDFIs with assets greater than $1 billion that are not currently serving their target markets, especially Black communities, well.

NFHA appreciates the effort that the federal banking regulators put into this much-needed overhaul of the CRA regulations. We will continue to review the rule in more detail and may share additional analysis in the future. Meanwhile, we urge the regulators to redouble their efforts to ensure regulations serve and benefit entire communities and not just some; appropriately supervise financial institutions for fair lending compliance; and ensure fair access to mortgages and other credit for everyone in this country, regardless of race or national origin.”

The National Fair Housing Alliance (NFHA) is the country’s only national civil rights organization dedicated solely to eliminating all forms of housing and lending discrimination and ensuring equal opportunities for all people. As the trade association for over 170 fair housing and justice-centered organizations and individuals throughout the U.S. and its territories, NFHA works to dismantle longstanding barriers to equity and build diverse, inclusive, well-resourced communities.