CRA for All Mortgage Lenders

There has been much written about the current financial meltdown, and in recent weeks, much finger-pointing about who or what is to blame. Some conservatives have placed the blame squarely on the 1977 federal Community Reinvestment Act which encourages banks to "meet the credit needs" of all neighborhoods where they have branches, including low to moderate income communities. They have done so despite the overwhelming factual evidence that points to lenders not covered by CRA as the culprits in the subprime mortgage mess. In Massachusetts, 98.6 of all subprime loans in 2006 were made by mortgage companies and banks not covered by the CRA. In the city of Boston, 99.1% of all subprime loans were made by institutions not covered by the CRA. Similar numbers pop up all around the country.

Over the next few months, a new President and an incoming Congress will seek to address the continuing fall-out from this mortgage lending-induced crisis. The nation should follow the lead of Massachusetts and extend the 31 year old Community Reinvestment Act to cover all mortgage lenders - whether or not they are depository institutions or whether or not they have branches where they lend. The mortgage lending business is national in scope and we can not afford to have critical gaps in CRA coverage such as letting Wells Fargo, WAMU, Option One, Ameriquest and others off the hook. Massachusetts moved in late 2007 to expand our state CRA to cover licensed mortgage lenders in our state that make more than 50 loans per year but states can not regulate subsidiaries of national banks. Only Congress and the President can make sure that all mortgage lenders have community responsibilites wherever they do business. CRA works - it has resulted in safe and sound lending in low income neighborhoods for decades. The most noteworthy CRA product in Massachusetts - the SoftSecond mortgage program - has reached 11,900 lower income borrowers (approximately 50% person of color) and has a delinquency rate of 1.8% compared to a statewide average mortgage delinquency rate for all incomes of 5%.

Now is the time to modernize this law and make it apply to all mortgage lenders.

Welcome to MAHA's blog

This is our first ever blog entry here at MAHA! We hope you enjoy our commentary from various MAHA staff and board members. Please post comments and keep the dialogue going strong.

MAHA is a non-profit organizaton, with offices in Dorchester and Dedham, MA, that works to break down the barriers for low and moderate income homebuyers and encourages public and private sector investment in affordable housing. Our campaigns since 1985 have resulted in more than $5.1 billion in investment in Massachusetts and the creation of the state's most affordable - and sustainable - mortgage program, the SoftSecond loan program for first-time homebuyers. Over 11,900 homebuyers have purchased their first home with the SoftSecond program and the program currently has a delinquency rate of 1.8% - much lower than the statewide average for all mortgages of 5%.