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The Community Reinvestment Act: A Welcome Anomaly in the Foreclosure Crisis
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| Contributor | ArmyDem |
| Last Edited | ArmyDem Jan 17, 2011 01:25pm |
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| Category | Study |
| News Date | Monday, January 7, 2008 07:00:00 PM UTC0:0 |
| Description | Indications that the CRA Deterred Irresponsible Lending in the 15 Most Populous U.S. Metropolitan Areas
January 7, 2008
Prepared by:
TRAIGER & HINCKLEY LLP
This study isolates the 2006 performance of one category of mortgage lenders—banks originating loans in their Community Reinvestment Act (CRA) assessment areas, referred to herein as “CRA Banks.” Our hypothesis is that the CRA, which requires banks to help serve the credit needs of their local communities, including low- and moderate-income (LMI) neighborhoods, consistent with safe and sound banking practices, may have deterred banks from
engaging, at least in their local communities, in lending practices that fuel foreclosures.
To test our hypothesis, we analyzed 2006 Home Mortgage Disclosure Act (HMDA) data to compare the lending performance of CRA Banks2 with other lenders in the 15 most populous U.S. metropolitan statistical areas (MSAs). Four areas relevant to the foreclosure crisis were reviewed: (1) the proportion of high cost loans; (2) the pricing of high cost loans; (3) the
proportion of originated loans retained by the lender; and (4) the relationship between foreclosure rates and concentration of bank branches. |
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