Our study suggests that without the CRA, the subprime crisis and related spike in
foreclosures might have negatively impacted even more borrowers and neighborhoods.
Compared to other lenders in their assessment areas, CRA Banks were less likely to make a high
cost loan, charged less for the high cost loans that were made, and were substantially more likely
to eschew the secondary market and hold high cost and other loans in portfolio.
branch availability is a key element of CRA compliance, and foreclosure rates were lower in
metropolitan areas with proportionately greater numbers of bank branches.
Prior to the foreclosure crisis, some had suggested that the boom in subprime mortgage
lending, by easing access to credit for LMI borrowers, rendered the CRA irrelevant or obsolete.16
However, the demise of subprime lending, even if only temporary, and the lower proportion of
high cost loans made by CRA Banks even when the subprime market was thriving, suggest that
the CRA still has a vital role to play.
Of course, CRA Banks, even in their own assessment areas, have a relatively small
portion of the mortgage market. In the 15 metropolitan areas analyzed, the CRA Bank market
share of all loan originations was less than 25 percent, limiting the law’s impact on the subprime
Because the vast majority of mortgage lending is done by other entities, some have
suggested extending CRA-like obligations to other lenders as a way of limiting the volume of
high cost loans and the problems associated with them. While extending the CRA to bank
affiliates and subsidiaries that lend in the bank’s community may have some merit, we believe
that the presence of local brick and mortar branches was as important a reason for CRA Banks’
better performance than fear of a less than satisfactory CRA evaluation.
Branches demonstrate a bank’s commitment to and investment in a community. The ongoing
interaction between bankers and residents that occurs at a deposit-taking branch provides
insight into credit needs that may enable banks to make more reliable assessments of borrowers’
creditworthiness and to avoid making loans that are likely to default. In addition, by providing
borrowers with a convenient location at which to apply for mortgage loans, branches may serve
as a magnet for attracting creditworthy borrowers. Without a branch nexus, it is doubtful
whether the same benefits can be realized for other lenders.