False Claims Link CRA to Subprime Mortgage Crisis
Smears Undercut Act’s Role in Affordable Home Financing

By LaTanya Ramsey, John Donohue and Robert K. Sheridan

Special to Banker & Tradesman

The Community Reinvestment Act (CRA) of 1977 is one of the most important pieces of legislation for low-income families in American history.

It helped put an end to the practice of redlining, or bank discrimination against neighborhoods populated by low-income families. In Massachusetts alone, more than 15,000 low- and moderate-income residents have been able to buy their first home thanks to the CRA.

So why is the CRA under fire, and why is it being blamed for causing the subprime mortgage crisis of all things? William James, the father of modern psychology once said, “There is nothing so absurd that it cannot be believed as truth if repeated often enough.”

Fewer Credit Unions and No Mortgage Companies Receive Top Grade

In 2011, about one-fifth of Massachusetts banks received an "Outstanding" rating on their Community Reinvestment Act evaluations from federal and state regulators, according to a report issued today by the Dorchester-based Massachusetts Affordable Housing Alliance (MAHA). This percentage is in the same general range as the three preceding years but it remains dramatically lower than during the 2005-2007 period when over one-third of all CRA ratings were "Outstanding."

The report was prepared for MAHA by Jim Campen, Professor Emeritus of Economics at the University of Massachusetts at Boston.

MAHA's twenty-first annual report lists the CRA ratings assessed to all Massachusetts banks, credit unions, and mortgage companies and evaluates the performance of the four federal regulators and the Massachusetts Division of Banks in reviewing bank performance in meeting community needs. The report finds that only 6 of 87 (or 6.9%) state-chartered credit unions in Massachusetts have an "Outstanding" CRA rating.