Report Finds Significant Rise In Community Reinvestment Act Lending
May 15, 2000
In April, the Treasury
Department released a report, The Community Reinvestment Act After Financial
Modernization: A Baseline Report. The study was mandated by the Financial
Modernization Act of 1999, which also calls for a follow-up report within 2
years. The Financial Modernization Act also mandated a Federal Reserve study
on profitability, default and delinquency rates for CRA-related lending. The
Federal Reserve study should be released soon.
The Treasury report
looked at the lending trends in 305 U.S. cities between 1993 and 1998. Some
of the highlights include:
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$467 billion in
mortgage credit flowed from CRA-covered lenders to CRA-eligible
The amount of home
mortgage lending to low- and moderate-income borrowers, low-and
moderate-income communities rose 80% during that time. In 1998 alone,
these institutions made $135 billion in mortgage loans to these
and their affiliates increased mortgage lending to low- and
moderate-income borrowers and communities at more than twice the rate of
increase for other borrowers. The number of mortgage loans made by CRA-covered
institutions and their affiliates to these borrowers and areas increased
by 39 percent between 1993 and 1998, while such institutions' loans to
other borrowers increased by only 17 percent.
drove growth in lending to low- and moderate-income borrowers and areas
for institutions not covered by CRA.
institutions increased their market share in prime mortgage lending to
low- and moderate-income borrowers and areas. Lenders covered by the CRA
primarily specialize in prime lending to borrowers without impaired
credit. In this market, covered lenders and their affiliates increased
their market share of lending. In 1993, such lenders accounted for 66
percent of prime mortgage loans to these borrowers and areas; by 1998,
their market share had increased to 71 percent.
In 84 percent of the
metropolitan areas studied, CRA-covered lenders and their affiliates
increased the share of their mortgage lending going to low- and
moderate-income borrowers and areas, by as much as 12 percentage points.
From 1996 to 1998,
the first three years these data were collected, lending by CRA- covered
institutions to small businesses located in low- and moderate-income
communities averaged $33 billion annually. Community development lending
by these institutions averaged $17 billion annually.