The Community Reinvestment Act (CRA)

In 1977, Congress enacted the Community Reinvestment Act (CRA), which required federal financial regulatory agencies to encourage regulated financial institutions to help meet the credit needs of their local communities, including low- to moderate-income neighborhoods. The law specified that such community lending activity be consistent with safe and sound operation of the institutions. An institution's record of meeting the credit needs of its entire community is taken into consideration by its supervisory agency when the institution seeks to expand through merger, acquisition or branching.

In 1981, each of the 12 Federal Reserve banks established a Community Affairs Office to work with depository institutions and the public in identifying credit needs within the community and innovative ways to address those needs. The Community Affairs staff provides information about successful initiatives and programs for community investment; reinvestment; small-business lending; affordable housing; and community, rural and economic development.

The Fed's Role

In general, the Fed's role in Community Affairs is to:

• Encourage partnerships among public and private organizations to help deliver credit to low- and moderate-income individuals and neighborhoods;
  
• Inform financial institutions and community organizations about the availability of public and private community development resources;
  
• Promote an understanding of the rights and responsibilities of individuals, communities and institutions regarding the Community Reinvestment Act (CRA) and the Home Mortgage Disclosure Act (HMDA); and
  
• Provide information on and increase the understanding of a community's needs and assets for community development.

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