Community Reinvestment Act


The Community Reinvestment Act is a federal law that encourages financial institutions to meet the credit needs of low- and moderate-income neighborhoods.

What is the Community Reinvestment Act?

The Community Reinvestment Act (CRA) is a federal law enacted in 1977. The federal banking agencies or regulators responsible for the CRA are the Federal Reserve (FRB), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).

These regulators review banks’ lending records. This assessment evaluates how these banks fulfilled their obligations towards low- and moderate-income neighborhoods. Specifically, this involves approving mortgage loans to qualified borrowers.

The Office of the Comptroller of the Currency claims that by promoting the availability of credit and additional banking services to low- and moderate-income individuals, banks can help rebuild, revitalize, and reinvest in these communities. They are able to do this by “sound lending and good business judgment that benefits the banks and the communities they serve.”


“Redlining” is the active refusal to offer home loans in specific neighborhoods based on income, racial or ethnic factors. This term stems from the practice of some lenders using a red pencil to outline these lower-income neighborhoods deemed too risky.

The CRA protects qualified individuals with sufficient finances and credit from being denied a home loan for living in these areas.

Banks’ Incentives

Regulators incentivize banks to do well on these assessments to get approval to grow its business. Their CRA score is heavily weighed when evaluating applications for future bank mergers, charters, acquisitions, branch openings, and deposit facilities.

No Ratios or Benchmarks

The Community Reinvestment Act does not prescribe ratios or benchmark regulators that banks have to meet. Instead, the assessment looks at lending activity and other data.

No High-Risk Loans

The CRA clearly states that the bank’s activities must be consistent with safe and sound operations. They should not make high-risk or sub-prime loans that endanger their financial stability.

Bank Ratings

Each bank receives one of the following scores:

  • Outstanding
  • Satisfactory
  • Needs to Improve
  • Substantial Noncompliance

You can view these CRA ratings publications online. Also, the banks have to fulfill the requirement of providing consumers evaluation upon their request.


The CRA applies to FDIC-insured depository institutions, such as national banks and state-chartered commercial and savings banks. On the other hand, there are institutions excluded from this federal law. This includes credit unions backed by the National Credit Union Share Insurance Fund (NCUSIF). Also an exemption are other non-bank entities supervised by the Consumer Financial Protection Bureau (CFPB).

The Community Reinvestment Act and Mortgages

The CRA is not a loan program. Instead, it is a set of guidelines or rules that encourage banks to offer loans to low- and moderate-income borrowers. This, of course, includes mortgages.

Instead, there are loans that may be available for low- to moderate-income homebuyers like the FHA loans. Also available are loan programs like Fannie Mae and Freddie Mac.

Contact a local lender in your area to find out your options and ask if you qualify for any additional local or county housing incentive programs.