Commentary: Filling a Gap in the Community Reinvestment Act Examiner Toolkit

Mark A. Willis
NYU Furman Center

Critical to the success of the Community Reinvestment Act (CRA) of 1977 is how bank regulators evaluate a bank’s performance in meeting the credit needs of low- and moderate-income (LMI) borrowers. Failure to measure the right outcomes results in a less-effective, if not ineffective, CRA, as banks focus on simply checking off boxes that may make little difference in the communities they serve. A particular problem is if the examiners cannot fully take into account variations in local market conditions and credit opportunities. As noted in Willis (2009), the examination process is critical if CRA is to continue to play a meaningful role in strengthening LMI households and communities. This commentary considers one aspect of the challenge of keeping CRA effective: the criteria for determining how well large banks (banks with assets of $1 billion or more) are serving the home purchase mortgage needs of LMI households. More specifically, I examine how well a bank is doing in helping to meet the credit needs of the LMI community compared with its performance in serving higher income groups.