Signed into law by President Jimmy Carter in 1977, the Community Reinvestment Act followed in the footsteps of previous legislation, including the Fair Housing Act (1968), the Equal Credit Opportunity Act (1974), and the Home Mortgage Disclosure Act (1975). Although each act mandated a different set of regulations for various aspects of the housing market–the first two working to prohibit discrimination in property transactions, the latter to require transparency from mortgage and lending institutions–the CRA specifically regulates banks.

Any bank that receives FDIC insurance protection is bound under the CRA to submit to an examination of their lending practices, in order to assess whether they are offering loans and credit with consistent standards in all communities, regardless of income, in which they are chartered. Prior to the CRA, banks were free to discriminate against low- or moderate-income home buyers, who were often minorities. The CRA does not force banks to approve high-risk loans, but it does require them to answer for the credit applications they reject. Each bank is reviewed in the context of its community, and assigned an assessment rating that is used to monitor the bank’s record.

The CRA has been revised by legislative action a number of times since its passage. In some cases, the revision allowed for greater oversight of banks by public action groups as well as government regulators. In others, the FNMA and FHLMC (Fannie Mae and Freddie Mac) were mandated to devote a percentage of their lending to affordable housing. Most recently, in 2008, Congress passed the Higher Education Opportunity Act, which adds to CRA compliance criteria an examination of how and to whom the bank provides low-cost education loans. A number of other proposed revisions have been considered in recent years, particularly in light of the provisions in the American Recovery and Reinvestment Act (also known as the stimulus bill).

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