Report outlines state community reinvestment laws, which apply in many cases beyond banks

A report on state community reinvestment laws – which take their own approach, separate from federal law, to preventing redlining – was released Thursday by the federal consumer financial protection agency.

The Consumer Financial Protection Bureau (CFPB) said its report analyzes and highlights “how states ensure financial institutions’ lending, services, and investment activities meet the credit needs of their communities.” The agency contended how the report details how states promote reinvestment activities for banks, credit unions and mortgage companies.

The bureau report examined the laws Connecticut, Illinois, Massachusetts, New York, Rhode Island, Washington, West Virginia and the District of Columbia. The agency said it found that many of those states adopted laws similar to the federal Community Reinvestment Act (CRA) in decades following the 1977 passage of the landmark federal anti-redlining law.

The agency said that the report shows how the financial market has changed since the passage of CRA, with nonbanks are now capturing a large share of the mortgage market.

CFPB asserted that while the federal CRA law applies strictly to banks, state reinvestment laws can apply to a wide range of financial institutions, including nonbank mortgage companies.

“Banks now originate and hold a much smaller share of outstanding mortgage debt than they did when the legislation was originally enacted,” CFPB said in a release. “In 1977, banks held 74% of outstanding mortgage debt. By 2007, this share had declined to just 28%. As of 2021, nonbank mortgage companies originated 64% of conventional home purchase mortgage loans, compared to the 25% originated by banks.”

CFPB Issues New Report on State Community Reinvestment Laws