The United States’ fair housing rules haven’t been updated since 1995. Earlier this month, federal regulators proposed significant changes to the Community Reinvestment Act, which addresses fair housing practices. Regulators have proposed the first major revamp to fair housing rules since 1995.
CRA is a federal law designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.
It’s been more than 25 years since there have been any changes to the act.
The changes, which will be presented for public comment through Aug. 5, would ensure banks are not engaging in practices of redlining or refusing to put money in areas often populated by minorities and lower-wage earners.
When the act initially was passed in 1977, it proved controversial. Some banks, particularly larger lenders, complained that the act would be costly and add the burden of their having to report their activities. Affordable housing advocates, on the other hand, insist the CRA has been vital in providing equal housing opportunities.
“The CRA is one of our most important tools to improve financial inclusion in communities across America, so it is critical to get reform right,” Lael Brainard, who serves as vice-chair of the board of governors of the Federal Reserve System, told CNBC. “It evaluates bank engagement across geographies and activities in order to ensure the CRA is effective in supporting a robust and inclusive financial services industry.”
In 1995, there were revisions made to CRA. Since then, online and mobile banking has become a major part of the finance industry and there are no CRA guidelines on this new technology.
The proposed revisions are also getting a pushback from larger lenders, who say the CRA expansion would add to their costs. Smaller banks would continue to operate under the previous rules.
CNBC reports the changes would tailor the CRA’s approach to ensure banks are not engaging in redlining or racial discrimination in housing. The Act was passed in 1977, and updated in 1994, but it has rarely stopped real estate agents and banks from committing housing discrimination.
CRA, said Brainard, “evaluates bank engagement across geographies and activities to ensure the CRA is effective in supporting a robust and inclusive financial services industry.”
The CRA revisions would provide public benchmarks for evaluating banks.
Housing advocates say the changes are necessary.
In 2019, a Newsday newspaper investigation revealed widespread housing discrimination by real estate agents in Long Island, New York. The investigation, which analyzed more than 5,000 home listings on Long Island and conducted interviews with more than 90 real estate agents, found Black men and women were discriminated against almost half of the time (49 percent).
A separate investigation conducted by Bloomberg found that Wells Fargo bank rejected half of its Black applicants trying to get their mortgages refinanced during the COVID-19 pandemic to lower their payments. A class-action lawsuit against the bank was filed in response to the findings.
The proposed changes would take effect a few months after publication in the Federal Register.