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How Lending Laws are Changing

Why CRA is important to prospective homeowners

When purchasing a home most of us will have to borrow from a lender. Whether it be a bank, credit union or private lender a mortgage is probably going to be in the cards. If you’re a first time homebuyer that is unable to secure the typical 0-3% down payment instead of the 20% down payment, CRA makes this possible through community based loan programs. When beginning the home financing process you must remain up to date on the ever changing government regulations with respect to lending and what it means to you.

The banking and finance world has seen many changes since the dawn of the new millenium. The Community Reinvestment Act (CRA) is a law that was built upon the foundation of helping the communities in which they operate. They encourage depository institutions to help meet the credit needs of everybody,  including low- and moderate-income (LMI) neighborhoods, consistent with safe and sound banking operations.

Now regulators must address where the CRA has fell behind major changes in the banking industry over the past 20 years. One of the most important areas regulators will address is how investments are counted in and out of designated Assessment Areas. With the rise of interstate banking and bank consolidation, as well as the merging of investment banking and commercial banking in so many large banks, defining what makes up a bank’s Assessment Area and how to count investments outside those boundaries is a has the greatest impact on America.

Assessment Area definition and application present unique challenges today because banks have alternate channels for accepting deposits, like mobile and online banking, that did not exist in 1977; customers with deposits are much more mobile today, and rural areas have experienced a disproportionate number of bank branch closures not envisioned in 1977.

These factors have contributed to a condition known as CRA hotspots, where CRA investment incentives are concentrated in a few states, like Utah, South Dakota and Delaware, while other states, where banks are less likely to be chartered, have become CRA deserts.

To stay up to date on the challenges that exist in your pursuit of homeownership, follow us on Facebook at or contact us at 510-237-6459 or

Richmond Neighborhood Housing Services, Inc. (510) 237-6459
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