DESCRIPTION OF THE STRATEGY
The federal Community Reinvestment Act (CRA) was enacted in 1977 to challenge widespread discrimination in mortgage lending and encourage banks to help meet the credit needs of all segments of their communities, including low- and moderate-income neighborhoods. Banks may provide loans, grants, technical assistance or services to support community development activities that serve low- and moderate-income communities, including assistance with the cost of abating or controlling lead hazards in housing. Banks report relevant activity to their respective federal regulatory agencies which monitor the banks and issue public ratings of the banks’ CRA activities in three areas: lending, investment, and services. These ratings affect whether regulators will permit banks to merge or expand. Many banks are therefore open to partnerships with local agencies or community-based organizations that are seeking financing or other support for specific proposals.
The loans and services result in housing rehabilitation or lead hazard control, or even education and outreach on preventing childhood lead poisoning.
Depending on the nature of the CRA investment, fewer children are exposed to lead-based paint hazards and/or the supply of lead-safe housing is increased.
Some financial institutions have established community lending programs with designated officers who work full time. Lending institutions that provide an ongoing point of contact can establish working relationships with public agencies and community-based organizations, sustain capacity-building, and become involved in a broad spectrum of activities.
Scope of Potential Impact
Regional (e.g. multi-county)
City - or - County - Wide
|Banks/Lending Institutions||Health Department|
Once a financial institution decides to increase lending or make qualified investments in underserved communities, it must develop appropriate agreements, policy guidelines, and operating procedures. Some banks execute contractual agreements with a nonprofit organization to administer the activity and assist in developing processing procedures for loans and establishing program eligibility criteria. These activities may require a significant investment of time and effort, depending on the experience level of and extent of initiative on the part of the lender and the nonprofit partner.
Other resource requirements:
It is easiest for the bank to partner with an experienced nonprofit agency operating an effective program that needs added funding or assistance to expand into new areas or activities.
The federal legal authority for CRA activity is already established (12 U.S.C. 2901).
The modest cost of operating community lending activities, as an in-house service and/or under contract with a nonprofit partner, counts as a CRA service.
Can be implemented at any time.
Moderate where there is a bank that is interested in undertaking CRA activity involving prevention of childhood lead poisoning.
The typical problem is finding or designing an activity or program that meets the bank’s criteria for lending or investment and also provides substantive assistance. For instance, if the CRA activity is lending to abate or control lead hazards, the bank must be willing to discount its loans or make other changes to its lending guidelines to make the loans attractive to borrowers. A reduction of 1% in the interest rate will generally not be sufficient. Many potential borrowers will not have good credit ratings. A modest relaxation of credit standards may qualify a few borrowers that otherwise could not borrow at conventional lending rates. However, it will probably be necessary to supplement lending at below-market rates with grants for a portion of the cost.