Bank lending to minority and low-income households and neighborhoods: Do community reinvestment agreements make a difference?

This article marks a new direction in research on the Community Development Act (CRA) by examining the outcomes of CRA agreements, comparing the mortgage and home improvement lending of banks with and without agreements. The analysis examines Home Mortgage Disclosure Act data for all the states and metropolitan areas with CRA agreements in effect and compares mortgage and lending to low-income and minority households and neighborhoods by banks with and without agreements and by banks with different types of agreements. Banks with CRA agreements appear to be more responsive than other banks to the credit needs of minority and low-income households and neighborhoods, especially when independent mortgage banks, which are not subject to the CRA, are removed from the analysis. Few significant differences, however, were found in the lending practices of banks with different types of agreements, including banks with negotiated and voluntary agreements.