The CRA Implications of Predatory Lending

Traditionally, policymakers, communities, and industry have regarded the Community Reinvestment Act (“CRA”) as a positive mandate for banks and thrifts to do good by increasing investment in lowand moderate-income (“LMI”) neighborhoods. The specific purpose of CRA is to encourage federally insured depository institutions “to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions.” When Congress enacted CRA in 1977, it was in response to the prevailing belief that under-investment was a root cause of blight in LMI neighborhoods. Congress hoped to reverse this blight by creating incentives for banks to increase their lending activities in low-income communities. At the time, it was inconceivable that LMI neighborhoods might eventually have too much credit in the form of abusive mortgages that would