Sound good? Think again.
Consider the history: The original Community Reinvestment Act was SO successful, it was one of the greatest contributors to the country's mortgage meltdown and, subsequently, the nation's economic crisis. The 1970s-era CRA promoted increased home ownership for low-income borrowers by requiring financial institutions to lend money to unqualified borrowers.
Surprise! Those borrowers were unqualified for a reason--as people continually failed to pay down their home mortgages, banks began to fail and foreclosure rates started to sky rocket. Having witnessed this economic decay first-hand, why on earth would federal lawmakers want to expand the scope of the CRA?
[# More #]
H.R. 1479 would extend the CRA's lending requirements to non-bank institutions like credit unions, insurance companies and independent mortgage lenders. It would also purposefully make the CRA more race-based by requiring specific CRA standards apply to minorities regardless of income. This provision goes well-beyond the original CRA which was meant specifically for assisting low- and moderate-income areas.
During today's hearing, Republican Representative Ed Royce (Calif.) announced his opposition to the bill. "Instead of looking to expand the number of institutions that must abide by Community Reinvestment Act regulations, I think we should reassess the role of this and other government mandates played in the financial collapse and consider scaling it back."
What a novel idea. But count on the Democrats in Congress to disagree. Texas Rep. Eddie Bernice Johnson (D), a sponsor of H.R. 1479, stressed that the CRA expansion is necessary:
Congress has passed a number of laws designed to combat redlining and eliminate housing discrimination, and the CRA is one such law that helps to ensure equal service to all people. Unfortunately, we all know that redlining still occurs, and I am here to discuss some of my concerns with the current law, and the need for modernization. ...Uh-huh. Call me a racist skeptic, but I'm not buying it.
I believe that by modernizing the CRA, we will see fewer home foreclosures and see smart and safe investments in our communities—exactly what our struggling economy needs right now.
And just because ACORN is still a top trend on twitter, it's probably a good idea to note that the group has used the CRA in the past to pressure banks into financing risky loans to unqualified borrowers.
Currently, Johnson's H.R. 1479 has 51 cosponsors. Many liberal Democrats have already signified their support and given the Dems' majority in the House, this bill could sail through.
It's time to start working those phones America. We can pull ourselves out of this economic slump and work to make sure a situation like this never happens again, but H.R. 1479 is certainly NOT the way to do it. Tell your representatives to oppose H.R. 1479.