Congress Seeks to Expand Community Reinvestment Act, Encourage Shakedowns

NLPC ^ | December 16, 2009 | Carl Horowitz

[jazusamo]

Of all the factors behind the collapse of America's financial institutions during the second half of 2008, few have been as trumpeted - or misunderstood - as the Community Reinvestment Act (CRA). This Carter-era legislation, intended to boost residential mortgage lending in lower-income urban neighborhoods, increasingly has served as a blank check for community groups to shake down depository institutions into lowering their credit standards to reach marginally qualified borrowers. In extracting such concessions, these groups have contributed to the ongoing explosion in loan defaults and foreclosures. Undaunted, House Democrats, led by Rep. Eddie Bernice Johnson, D-Tex., are proposing to make the CRA even more aggressive in rooting out "redlining," the practice by which mortgage lenders allegedly refuse to extend credit to low-income and often nonwhite minority neighborhoods.

The bill is called the Community Reinvestment Modernization Act of 2009 (H.R. 1479). What's being "modernized" isn't clear. What is clear is the radical nature of this legislation. Introduced in March by Congresswoman Johnson and attracting as of this date nearly 60 co-sponsors, the measure would subject mortgage lenders to credit allocation requirements so onerous that even longtime supporters of the law might balk. The House Financial Services Committee has yet to take action. But that soon could change once Congress votes on its massive rewrite of health care policy.

What would the new CRA legislation do? For one thing, it would extend the law's institutional reach. From the start, the act has applied only to federally-insured depository institutions; i.e., commercial banks and savings & loan ("thrift") associations. Under current law, a non-bank institution may undergo federal regulatory agency review if it chooses to do so, but it does not have to. Rep. Johnson and her allies would mandate reviews of credit unions, insurance companies, mortgage banks and other non-depository institutions...

[jazusamo]

Looks like the Dems are trying harder than ever to bankrupt us.

[JohnQ1]

CRA activities confuse me. I keep seeing “underserved” people and registering “undeserved” people. No people are undeserved; some are undeserving; so the undeserving are underserved? Then my brain starts smoking and shuts down.