Congressman Cleaver Applauds Biden Administration’s Historic Proposed Updates to the Community Reinvestment Act

May 5, 2022
Press Release

(Kansas City, MO) – Today, U.S. federal regulators announced a proposal to strengthen and modernize the Community Reinvestment Act (CRA) to ensure regulated financial institutions are better servicing the credit needs of American communities, including rural, low-, and moderate-income communities. The CRA requires federally chartered or insured financial institutions to serve the needs of their respective communities in order to pass examinations conducted by federal banking regulators. Last November, U.S. Representative Emanuel Cleaver, II (D-MO), Chair of the Financial Services Subcommittee on Housing, Community Development, and Insurance, called on federal regulators to work in conjunction to strengthen CRA requirements in a way that would incentivize more public and private investment, provide greater access to banking services, address affordable housing shortages across the nation, and better reflect community need.

"As a member of the House Committee on Financial Services, I have been calling on regulators to update CRA regulations for years now so that underserved communities desperate for banking services can access the credit and investments needed to grow stronger—and I'm thrilled to see the Biden Administration moving forward," said Congressman Cleaver. "The proposed rule announced today—which has been created with feedback from critical stakeholders and will be subject to additional public input in the months ahead—will help to address our nation's affordable housing crisis and support low- and moderate-income communities by expanding access to credit, investment, and basic banking services, ensuring local banks have internet and mobile banking, and maintaining a unified approach from the federal government, rather than a bureaucratic patchwork of government oversight. From the urban core to the most rural towns, updating the CRA will benefit communities all across Missouri, and I look forward to continuing my work with the Biden Administration to ensure the financial system is not leaving disadvantaged communities behind."

According to the Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and the Board of Governors of the Federal Reserve System (Federal Reserve), the proposal would:

  • Expand access to credit, investment, and basic banking services in low- and moderate-income communities by promoting community engagement and financial inclusion, emphasizing smaller-value loans and investments that have a major impact and are more responsive to the needs of low- and moderate-income communities, and allowing regulators to better evaluate how banks are performing in the communities in which they operate;
  • Adapt to changes in the banking industry, including internet and mobile banking, by updating CRA assessment areas to include activities associated with online and mobile banking, branchless banking, and hybrid models;
  • Provide greater clarity, consistency, and transparency through the adoption of a metrics-based approach to CRA evaluations of retail lending and community development financing, which includes public benchmarks, for greater clarity and consistency. Additionally, it would also clarify eligible CRA activities, such as affordable housing, that are focused on rural, low-, and moderate-income communities; and
  • Tailor CRA evaluations and data collection to account for bank size and type as a recognition of the differences in bank size and business models, ensuring that the smallest banks can continue to be evaluated under the existing CRA regulatory framework with the option to be evaluated under aspects of the new proposed framework.

Congress passed the CRA in 1977 with the specific intention of reversing the discriminatory practice of redlining and ensuring that banks serve the needs of communities that have been historically excluded from fair and equitable lending. Still, the lack of equitable access to credit by communities of color persists to this day. According to the Department of Housing and Urban Development (HUD), following a high of 49.7% in 2004, Black homeownership fell to 40.6% in 2019—lower than it was when the Fair Housing Act was passed in 1968—demonstrating the need for Congress to revamp and modernize the CRA to ensure the law is effective in the changing financial landscape of the 21st century.

In April 2021, Chair Cleaver joined Senator Elizabeth Warren (D-MA) to introduce the American Housing and Economic Mobility Act, which would take a major step toward addressing the effects of decades of housing discrimination on communities of color. Specifically, the bill would hold all financial institutions, including fintech firms and other nontraditional banks, accountable for providing access to credit by expanding the CRA to cover non-bank mortgage companies, promoting investment in activities that help low- and middle-income communities, and strengthening sanctions against financial institutions that fail to follow regulations under the CRA.

In November 2021, Chair Cleaver delivered a letter to the heads of the FDIC, OCC, and Federal Reserve, encouraging the bank regulators to work in partnership to modernize outdated CRA regulations so that the historic law can remain effective. In the letter, Cleaver noted that "Non-White households' access to affordable home mortgage loans today fall far short of what CRA's champions originally envisioned" and that "quantitative and qualitative evaluation of efforts to increase racial equity should, therefore, be part of CRA assessments."

Missourians can find more information on the proposed rule from the FDIC, OCC, and Federal Reserve here, and provide their opinion with a comment on the proposed rule here.

Emanuel Cleaver, II is the U.S. Representative for Missouri's Fifth Congressional District, which includes Kansas City, Independence, Lee's Summit, Raytown, Grandview, Sugar Creek, Blue Springs, Grain Valley, Oak Grove, North Kansas City, Gladstone, Claycomo, and all of Ray, Lafayette, and Saline Counties. He is a member of the exclusive House Financial Services Committee; Chairman of the House Subcommittee on Housing, Community Development, and Insurance; member of the Select Committee on the Modernization of Congress; member of the Committee on Homeland Security; and a Senior Whip of the Democratic Caucus. A high-resolution photo of Congressman Cleaver is available here.