Will states lead the way on expanding CRA to nonbanks?
By Hannah Lang
After decades of calls to expand the Community Reinvestment Act’s anti-redlining obligations to nonbanks, the idea is going mainstream thanks to key endorsements from states and even the chairman of the Federal Reserve….Many acknowledge that the impact that state legislation could have on investment in low- to moderate-income communities is likely limited. “I think it has to be federal” to be effective, said Karen Petrou, managing partner at Federal Financial Analytics. “All of these are national markets, especially mortgage origination.”…Petrou noted that the banking regulators in their CRA reform discussions could do something at the edges without authorization from Congress to extend CRA-like obligations to nonbanks….“It hasn’t been discussed, but you could do it, for example, in this new rule [by] potentially saying, insured depositories may not partner with a nonbank unless the nonbank activities supported by that bank are subject to the equivalent of CRA examination,” she said.