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'A key weapon in the Cisneros arsenal was the Clinton administrations changes to the Community Reinvestment Act. The CRA was passed in 1977 and updated in 1995 to pressure lenders into making more loans to moderate-income borrowers by allowing regulators to deny merger approvals for banks with low CRA ratings. Even complaints brought by activists, such as the leftist group ACORN, were now counted against a banks CRA rating. The result was that banks began issuing more loans to otherwise uncreditworthy borrowers while purchasing more CRA mortgage-backed securities. As housing finance expert Peter Wallison noted, The most important fact associated with the CRA is the effort to reduce underwriting standards. Once those standards were relaxed they spread rapidly to the prime market and to subprime markets where loans were made by lenders other than insured banks.'
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Some CRA criteria that mandated higher risk lending if a bank did not want to be slapped with a negative CRA kiss of death:
- Percentage of loans made in the assessment area
- Distribution of loans among geographic areas, people of different income levels, and businesses of different sizes
- Quality of service for credit needs of extremely economically disadvantaged areas, low-income individuals, and small businesses
- Use of creative lending practices to address credit needs of low- or moderate-income people or neighborhoods
- Level of qualified community development investments and grants, particularly those not routinely provided by private investors
- Use of innovative or complex qualified investments to support community development needs
- Accessibility of services to all geographic areas and people of different income levels
http://www.frbatlanta.org/cra_invok...460-4A73-864B93A6780C7634&method=display_body
It is there in black and white.
What part of a bank using 'Creative lending practices' to service low-income neighborhoods do you not get?
Foreclosures were predominately in the suburbs, nothing to do with the inner-city focus of the CRA.