Federal regulators are proposing an overhaul of fair lending and housing rules

Lumber on the site of a home under construction in Cielo at Sand Creek of the Century Communities housing development in Antioch, California, on Thursday, March 31, 2022.

David Paul Morris | Bloomberg | Getty Images

Banking regulators on Thursday proposed the first sweeping changes in more than 25 years to a controversial law aimed at increasing lending to low- and middle-income communities.

The changes would adjust the Community Reinvestment Act’s approach to ensure banks don’t “redline” or refuse to invest money in areas that are often populated by minority and low-income communities.

Passed in 1977, the law was a sore point for some banks, particularly larger lenders, who complain about the cost and reporting burden. However, affordable housing advocates say the CRA has been instrumental in creating equal housing opportunities.

“The CRA is one of our most important tools for improving financial inclusion in communities across America, so getting the reforms right is critical,” said Lael Brainard, vice chairman of the Federal Reserve. “It assesses banks’ engagement across geographies and operations to ensure the CRA is effectively supporting a resilient and inclusive financial services industry.”

Since recent CRA revisions, online and mobile banking have become an important part of the financial industry, with no more specific guidelines for how they are assessed under fair housing guidelines.

The changes aim to provide clearer public benchmarks for assessment and allow smaller banks to continue operating under the previous rules.

Larger lenders have opposed the CRA expansion, saying the rules increase their costs and are excessive.

Fed Governor Michelle Bowman said she generally supports the possibility of revisions but expressed hesitation about the impact of the new proposal.

For example, she noted that banks with assets in excess of $10 billion would be subject to a variety of new disclosure requirements, including auto loans, mobile and online banking services, and community development financing.

“While I support the release of the proposed public comment rule, there are significant unanswered questions raised by the proposal,” Bowman said. “Basically, we do not know whether the costs imposed under the proposal will outweigh the benefits.”

Public comment is sought on the proposal by August 5, with the expectation that it will come into effect several months after publication in the Federal Register.

https://www.cnbc.com/2022/05/05/feds-propose-first-major-revamp-to-fair-housing-rules-since-1995.html Federal regulators are proposing an overhaul of fair lending and housing rules

Jane Marczewski

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