NCRC: Expand CRA to Cover Credit Unions, Other Nonbanks

The Community Reinvestment Act should be expanded to cover credit unions, other nonbank lenders and insurers, according to the National Community Reinvestment Coalition. Noting the growing share of nonbanks and credit unions in mortgage lending, NCRC Senior Policy Adviser Josh Silver argued that if nonbanks remain outside of CRA, “the competitive position of banks eventually will be undermined to the detriment of access to safe and sound credit and capital for LMI communities.”

“If one segment of the lending industry complies with CRA while the other segments do not, this ultimately will make lending to underserved communities more difficult,” Silver wrote. “The non-CRA covered institutions can skim the most profitable parts of the market and focus their lending on the most affluent borrowers.”

Silver described the approach taken under Massachusetts’ state-level CRA-like statute, which does apply to nonbank mortgage lenders and credit unions. It involves a lending test similar to the one used for banks, with credit union community investment exams tailored for their size and fields of membership. “The credit union lobby vehemently opposed efforts to extend CRA to credit unions, claiming that the credit union business models do not lend themselves to CRA exams,” Silver wrote. “In spite of the noise and heat in the nation’s capital over CRA for credit unions, Massachusetts has been quietly applying CRA to credit unions of various asset sizes from a few million dollars to several hundred million dollars.”