Community Reinvestment Act
The Community Reinvestment Act is a bill enacted by congress in 1977 that intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations. The regulation was substantially revised in May 1995 and updated again in August 2005. It has been blamed for being a major contributing factor to the 2008 housing collapse by lowing acceptable lending standards.
The Fed, together with the other financial regulatory agencies, is currently considering what can be done to make CRA a more effective regulatory incentive going forward to address an unprecedented set of community needs in the wake of the foreclosure crisis. As part of this regulatory initiative, the agencies held CRA hearings and invited written comments on how to improve CRA in June 2010. In December, 2010, the agencies published amendments to the rule to encourage financial institutions to participate in activities aimed at revitalizing areas designated by the Department of Housing and Urban Development for funds under the Neighborhood Stabilization Program.