Treasury is expected to unveil significant changes to Community Reinvestment Act (CRA) requirements, according to several media reports. CRA, originally put in place to combat redlining practices by home lenders, today accounts for a significant portion of housing credit investment, as banks can fulfill CRA requirements by investing in the LIHTC.
Treasury Secretary Steve Mnuchin made clear during his confirmation hearing last summer that CRA needs to be modernized, and almost all groups agree on that point alone, however the details on how to modernize CRA can differ. One possible change to CRA may be allowing banks more flexibility – expanding the definition of community development loans to financing for small businesses and infrastructure. The details of Treasury’s proposed changes are still largely unknown. Stay tuned for developments on this issue.