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Legislation to Reverse CRA Changes Approved by House

The U.S. House of Representatives Monday passed a Congressional Review Act aimed at reversing a rule altering the Community Reinvestment Act (CRA).

The rule in question was finalized by the Office of the Comptroller of the Currency (OCC) in May and has received praise from some in the industry as well as sharp criticism, particularly from Rep. Maxine Waters, Chairwoman of the House Financial Services Committee.

The rule, aimed at “strengthening and modernizing” the CRA would increase CRA-related lending and investment in low- and moderate-income communities, according to the OCC.

However, the OCC released the rule without the approval and support of the Federal Deposit Insurance Corporation or the Federal Reserve Board, prompting Waters to accuse former Comptroller Joseph Otting of rushing the final rule through just before leaving his post.

Opposing the rule from the start, Waters introduced her Congressional Review Act earlier this month alongside Rep. Gregory Meeks, Chair of the Subcommittee on Consumer Protection and Financial Institutions. Seventy other members of the House co-sponsored the act.

“I am deeply concerned that the OCC’s final rule will harm low-income and minority communities that are disproportionately suffering during this crisis, effectively turning the Community Reinvestment Act into the Community Disinvestment Act,” Waters stated before the House on Monday.

The new rule “incentivizes large deals at the expense of smaller and more continuous financial transactions” according to Waters. The OCC rule would reward CRA funding to institutions that were active in Opportunity Zones without ensuring that their activities specifically benefitted low- to moderate-income community members.

“This could lead to the unacceptable result of banks receiving CRA funding for building luxury housing in Opportunity Zones, providing no direct benefit to LMI communities,” Waters stated.

Waters also asserted that redlining has been detected in 60 metros despite 98% of banks passing their CRA exams on a regular basis.

A joint statement from the National Community Reinvestment Coalition and several consumer protection and civil rights organizations said the OCC’s rule included “gaping loopholes” and included an “overly simplistic metrics system” that would allow banks to meet CRA requirements “while leaving too many credit needs unmet for underserved consumers and neighborhoods.”

In its release of the final rule in May, the OCC stated the rule reflected “careful consideration of the more than 7,500 comments stakeholders submitted in response to the notice of proposed rulemaking” announced in December and said, “The final rule addresses the shortcomings in the current CRA regulatory framework that has not kept pace with banking industry advancements, and ensures the regulations no longer adversely affect the very communities the CRA was intended to help.”

The Consumer Bankers Association supported the OCC rule for “attempting to bring an analog regulation into a digital rule” and creating a “more transparent and objective process for measuring banks’ continued service to their clients.”

About Author: Krista F. Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.
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