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Financial Services Law Insights and Observations

CFPB releases report on state community reinvestment acts

Agency Rule-Making & Guidance Federal Issues CFPB CRA Redlining Fair Access to Credit Act Banking

Agency Rule-Making & Guidance

On November 2, the CFPB issued a report on several states’ community reinvestment laws. The report focused on how much outstanding mortgage debt banks hold in the residential mortgage market: in 1977, “banks held 74 percent of outstanding mortgage debt. By 2007, this share had declined to just 28 percent.”

In 1977, Congress passed the Community Reinvestment Act (CRA) to combat redlining practices that prevailed despite the passing of the Fair Housing Act of 1968 and the Home Mortgage Disclosure Act of 1975. While the federal CRA applies to banks only, many states created their community reinvestment laws to cover non-bank mortgage companies, including CT, IL, MA, NY, RI, WA, WV, and DC.

Key findings from the CFPB's report are below:

  • Some states require mortgage companies to provide affirmative lending, service delivery, and investment services;
  • Some states conduct independent examinations, while other states review federal performance evaluations in conjunction with state factors;
  • Enforcement includes limitations on mergers, acquisitions, branching activities, and licensing;
  • Some states collect information beyond federal requirements for evaluation; and
  • Some state acts have been amended in response to market changes.

The CFPB finds that states play an active role in promoting reinvestment by institutions, but further review is necessary to understand these developments.