Information Dynamics and CRA Strategy

Congress enacted the Community Reinvestment Act of 1977 (CRA) to combat redlining, whereby lenders allegedly curtail the supply of mortgage credit to particular neighborhoods, discounting the creditworthiness of the applicants because the neighborhood itself is considered undesirable. Under the CRA’s provisions, bank regulators are required to use their supervisory authority to encourage each depository institution including those in low- and moderate income communities-to help meet its community’s credit needs consistent with safe and sound lending practices.