Listen to this post

On November 2, the CFPB issued a new report on state Community Reinvestment Act laws. The report found that many states adopted Community Reinvestment Acts (CRAs) similar to the federal Community Reinvestment Act of 1977. The report showed that state CRAs differ from the federal CRA to account for unique reinvestment priorities of individual states. The report also showed that nonbank mortgage companies’ increasing market share has influenced how states have developed their CRAs.

The report reviewed state CRA laws from Connecticut, Illinois, Massachusetts, New York, Rhode Island, Washington, West Virginia, and the District of Columbia. Key highlights of the report include:

  • Some states impose an affirmative lending, service delivery, and investment obligation on mortgage companies, in addition to deposit-taking institutions.
  • In certain states, independent assessments of lending, services, and investment performance are carried out, while others integrate federal performance evaluations with state-specific criteria.
  • Enforcement measures include restrictions on mergers, acquisitions, branching activities, and licensing.
  • Several states go beyond federal requirements by collecting and evaluating additional data concerning lending, services, and investment performance within their jurisdictions.
  • State CRAs have evolved over time in response to shifting financial landscapes, covering additional types of financial institutions, collecting additional data to better understand financial markets, and addressing other state-specific needs.

Putting It Into Practice: The state CRAs play a pivotal role in shaping responsible lending, service delivery, and investment practices within individual states. These regulations vary in their scope, requirements, and enforcement mechanisms, reflecting the unique financial needs and characteristics of each state. The federal CRA was established in part to help address redlining – the CFPB’s report on state CRAs comes as the Bureau and DOJ have recently increased their focus on combatting redlining alleged against banks and other mortgage lending businesses.