Paying More for the American Dream III, jointly published by seven regional policy groups, looks at how implementation of the CRA influenced the pricing of loans. The conclusions reveal that when banks and thrifts were obligated to follow the CRA, they made fewer high-cost loans. When unfettered by the CRA, their loan pricing mirrored the pilloried independent mortgage companies (i.e. IndyMac, E-Loan, First Franklin, or DecisionOne, among others).
Let’s review how the CRA works: banks and thrifts are examined by their lending to low and moderate income (LMI) borrowers or to borrowers in LMI neighborhoods. The law is enforced only in places where those banks have branches with deposits. BB&T has CRA obligations in Raleigh or Atlanta, but not in Philadelphia. Wells now has them in Charlotte, but it didn’t in 2007. Not a bank or thrift? Then there’s no obligation at all.
That sorts into three kinds of lenders: banks bound by CRA, banks operating where they aren’t, and independents. This table, from the study, compares their percentages of high-cost loans to LMI groups.
Charlotte lending supports the report’s theme: without CRA, low income families would be paying a lot more for their mortgages.