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Community Reinvestment Act

Posted 1 Mar 2010 at 14:36 PM by spanner
Updated 1 Mar 2010 at 15:05 PM by spanner (Removal of picture formatting of USGOV posting)



See easy read following the original




ORIGINAL
Community Reinvestment Act

* The Community Reinvestment Act (CRA), enacted by Congress in 1977 (12 U.S.C. 2901) and implemented by Regulations 12 CFR parts 25, 228, 345, and 563e, is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate. In this section of the web site, you can find out more about the regulation and its interpretation and information on CRA examinations.

* The Community Reinvestment Act (or CRA, 95-128, title VIII, 91 1147, http://en.wikipedia.org/wiki/Title_12_of_the_United_States_Code 2901 et seq.) is ahttp://en.wikipedia.org/wiki/United_States_federal_law that requires http://en.wikipedia.org/wiki/Bank and http://en.wikipedia.org/wiki/Savings_and_loan_association to offer credit throughout their entire market area and prohibits them from targeting only wealthier neighborhoods with their services, a practice known as "http://en.wikipedia.org/wiki/Redlining." The purpose of the CRA is to provide credit, including home ownership opportunities to underserved populations and commercial loans to small businesses. It has been subjected to important regulatory revisions.
* Clinton Administration Changes of 1995. In 1995, as a result of interest from http://en.wikipedia.org/wiki/President_of_the_United_Stateshttp://en.wikipedia.org/wiki/Bill_Clinton's administration, the implementing regulations for the CRA were strengthened by focusing the financial regulators' attention on institutions' performance in helping to meet community credit needs. These revisions with an effective starting date ofhttp://en.wikipedia.org/wiki/January_31, http://en.wikipedia.org/wiki/1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans. These changes were very controversial and as a result, the regulators agreed to revisit the rule after it had been fully implemented for seven years. Thus in 2002, the regulators opened up the regulation for review and potential revision Part of the increase in home loans was due to increased efficiency and the genesis of lenders, like http://en.wikipedia.org/wiki/Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans. The revisions allowed the http://en.wikipedia.org/wiki/Securitization of CRA loans containing http://en.wikipedia.org/wiki/Subprime_lending. The first public http://en.wikipedia.org/wiki/Securitization of CRA loans started in 1997 by http://en.wikipedia.org/wiki/Bear_Stearns. The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent.

* George W. Bush Administration Proposed Changes of 2003 In http://en.wikipedia.org/wiki/2003, the Bush Administration recommended what the http://en.wikipedia.org/wiki/The_New_York_Times called "the most significant regulatory overhaul in the housing finance industry since the http://en.wikipedia.org/wiki/Savings_and_loan_crisis a decade ago." This change was to move governmental supervision of two of the primary agents guaranteeing subprime loans, http://en.wikipedia.org/wiki/Fannie_Mae and http://en.wikipedia.org/wiki/Freddie_Mac under a new agency created within the http://en.wikipedia.org/wiki/United_States_Department_of_the_Treasury. However, it did not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enabled them to issue debt at significantly lower rates than their competitors. The changes were generally opposed along Party lines and eventually failed to happen.

* The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations. It was enacted by the Congress in 1977 (12 U.S.C. 2901) and is implemented by Regulation BB (12 CFR 22. The regulation was substantially revised in May 1995, and was most recently amended in August 2005.

Evaluation of CRA Performance
The CRA requires that each depository institution's record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account in considering an institution's application for deposit facilities. Neither the CRA nor its implementing regulation gives specific criteria for rating the performance of depository institutions. Rather, the law indicates that the evaluation process should accommodate an institution's individual circumstances. Nor does the law require institutions to make high-risk loans that jeopardize their safety. To the contrary, the law makes it clear that an institution's CRA activities should be undertaken in a safe and sound manner. CRA examinations are conducted by the federal agencies that are responsible for supervising depository institutions. Information on this page is related to depository institutions that are examined by the Federal Reserve, mainly state-chartered banks that are members of the Federal Reserve. CRA information on other depository institutions is available from the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS). Interagency information about the CRA is available from the Federal Financial Institutions Examination Council (FFIEC).


EASY READ
Community Reinvestment Act
Cleaned up for easy read
* The Community Reinvestment Act (CRA), enacted by Congress in 1977 (12 U.S.C. 2901) and implemented by Regulations 12 CFR parts 25, 228, 345, and 563e, is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate. In this section of the web site, you can find out more about the regulation and its interpretation and information on CRA examinations.

* The Community Reinvestment Act (or CRA,Pub. L 95-128, title VIII, 91 1147,12U.S.C. & 2901) is a United States Federal law that requiresbanks and thrifts to offer credit throughout their entire market area and prohibits them from targeting only wealthier neighborhoods with their services, a practice known as "redlining." The purpose of the CRA is to provide credit, including home ownership opportunities to underserved populations and commercial loans to small businesses. It has been subjected to important regulatory revisions.
* Clinton Administration Changes of 1995. In 1995, as a result of interest from President Bill Clinton's administration, the implementing regulations for the CRA were strengthened by focusing the financial regulators' attention on institutions' performance in helping to meet community credit needs. These revisions with an effective starting date of January 31, 1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans. These changes were very controversial and as a result, the regulators agreed to revisit the rule after it had been fully implemented for seven years. Thus in 2002, the regulators opened up the regulation for review and potential revision Part of the increase in home loans was due to increased efficiency and the genesis of lenders, like Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans. The revisions allowed the securitization of CRA loans containing subprime mortgages. The first public securitization of CRA loans started in 1997 byBear Stearns. The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent.
* George W. Bush Administration Proposed Changes of 2003 In 2003, the Bush Administration recommended what the NY Times called "the most significant regulatory overhaul in the housing finance industry since thesavings and loan crisis a decade ago." This change was to move governmental supervision of two of the primary agents guaranteeing subprime loans, Fannie Mae andFreddie Mac under a new agency created within the Department of the Treasury. However, it did not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enabled them to issue debt at significantly lower rates than their competitors. The changes were generally opposed along Party lines and eventually failed to happen.
* The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations. It was enacted by the Congress in 1977 (12 U.S.C. 2901) and is implemented by Regulation BB (12 CFR 22. The regulation was substantially revised in May 1995, and was most recently amended in August 2005.

Evaluation of CRA Performance
The CRA requires that each depository institution's record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account in considering an institution's application for deposit facilities. Neither the CRA nor its implementing regulation gives specific criteria for rating the performance of depository institutions. Rather, the law indicates that the evaluation process should accommodate an institution's individual circumstances. Nor does the law require institutions to make high-risk loans that jeopardize their safety. To the contrary, the law makes it clear that an institution's CRA activities should be undertaken in a safe and sound manner. CRA examinations are conducted by the federal agencies that are responsible for supervising depository institutions. Information on this page is related to depository institutions that are examined by the Federal Reserve, mainly state-chartered banks that are members of the Federal Reserve. CRA information on other depository institutions is available from the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS). Interagency information about the CRA is available from the Federal Financial Institutions Examination Council (FFIEC).



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