Stop the Attacks on the CRA!

Recent conversations pointing to the Community Reinvestment Act as the cause of the foreclosure crisis are an attempt to deflect attention away from the real problem affecting our financial system. That problem is failed regulatory policy and oversight.

For more than a decade, community leaders, civil rights proponents and housing groups have raised concerns about unfair, deceptive and abusive lending practices that have undermined homeownership aspirations for millions of working families. Those pleas for better regulatory policy and oversight not only went ignored, in some cases they were contradicted by regulatory policy that made predatory lending more virulent and prevalent in low-income neighborhoods and communities of color.

Over that same period, thousands of pages of local, state and federal testimony, peer reviewed policy papers and speeches (many from the groups signed onto this statement) have forewarned of a pending crisis stemming from lax regulatory oversight and enforcement. Yet no serious federal response was made. As Harvard University law professor Elizabeth Warren has artfully stated, consumers had better protection buying a toaster or microwave oven than they had when purchasing the family home.

One example of regulatory failure is that many vital financial institutions - and the products they created and sold -- were not covered by meaningful regulation. Some market players clearly knew their actions were creating a potential market crisis. A Securities and Exchange Commission (SEC) Report recently found that in December of 2006 one analytical manager at a prominent credit rating agency wrote to another senior analytical manager that the rating agencies continue to create an "even bigger monster - the CDO market. Let's hope we are all wealthy and retired by the time this house of cards falters."

Improved regulation of the financial system - including brokers, lenders, appraisers, rating agencies and securitizers - was essential. If the Community Reinvestment Act - and other appropriate regulation -- had been applied to independent mortgage companies and other non-bank financial institutions, it is likely that our nation would not be confronted with a foreclosure crisis. Critics of the law conveniently ignore that about 75 percent of sub-prime loans were not covered by CRA. They also ignore the fact that most reckless and damaging subprime lending occurred between 2003 and 2007, long after CRA's passage in 1977.

CRA provides clear and strong incentives for banks to make safe and sound loans and penalize them for making loans that are unfair and abusive. It is an antidote, not a cause of the current crisis.

SCANPH is asking you and your organization to Take Action today! Demand that Congress hold oversight hearings on the financial sector.

The real possibility exists that under-served neighborhoods will suffer and the Community Reinvestment Act (CRA) will be weakened if we don't act. CRA - in its most basic form - simply creates an affirmative obligation that financial institutions meet all communities' credit needs.

Please download the form letter located at this link and cut and paste it on your organization's letterhead and fax/mail it to the Offices of Congressman Barney Frank and Senator Christopher Dodd today. To read more about the campaign to defend CRA please visit our Take Action page.