The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) have proposed sweeping changes to the Community Reinvestment Act (CRA) that would weaken support for affordable housing, reduce private-sector investment in underserved communities, and jeopardize funding for nonprofit organizations serving urban, rural, and small-city markets. This hastily developed proposal represents a major retreat from CRA’s purpose and nearly five decades of progress.
NHC strongly opposes the proposed rule and has urged that it be withdrawn. It represents a deeply disappointing missed opportunity to build on nearly five decades of progress in expanding access to credit and investment.
Regulatory policy should not become a pendulum that swings dramatically with each change in administration. Lasting regulatory policy should be durable, transparent, and developed through a process that gives financial institutions and community organizations the confidence to make long-term investments. Frequent, sweeping changes to the rules create uncertainty for financial institutions of every size, requiring them to invest significant time and resources updating compliance systems, retraining staff, and adjusting business practices. Those costs ultimately reduce the resources available to support lending, community development, and affordable housing.
The proposal’s treatment of grants and operating support is particularly concerning. Restricting CRA consideration for private-sector operating support could reduce funding for Community Development Financial Institutions (CDFIs), affordable housing organizations, homeownership counselors, fair housing groups, and other nonprofits that work directly with families and communities. Under existing CRA practice, banks can receive consideration for grants and other forms of operating support to organizations that primarily serve low‑ and moderate‑income communities and help meet credit needs.
Removing CRA credit for operating support to these organizations would be a serious mistake. These groups provide counseling, technical assistance, outreach, development capacity, and enforcement assistance that help translate bank capital into successful, compliant, community‑serving activity. Weakening that support would reduce capacity in precisely the places where it is most fragile, including rural regions and smaller cities without deep philanthropic infrastructure. That outcome would cut directly against CRA’s core purpose: to encourage banks to meet the credit needs of their communities in effective, responsible, and lasting ways.
A change of this magnitude should not move forward through only two banking regulators while the Federal Reserve remains outside the process. In fact, the FDIC and OCC not only failed to include the Federal Reserve Board; they also excluded the Fed from formal discussions regarding the proposal until a week before it was issued. Given the importance of CRA to communities, financial institutions, and local economies nationwide, any significant revisions should include all three federal banking regulators, robust public engagement, and careful congressional oversight.
CRA was enacted in response to a long history of discriminatory lending practices that denied many communities access to credit and investment. Those practices contributed to persistent disparities in homeownership, wealth creation, and neighborhood development that remain evident today. For nearly 50 years, CRA has helped ensure that banks meet the credit needs of the communities they serve by supporting affordable housing, small business development, and community-based organizations. Any significant changes to that framework should strengthen, not diminish, those longstanding objectives.
The CRA has worked for nearly half a century because it creates a stable, durable incentive for banks to lend, invest, and provide services in underserved communities. In 2024, CRA incentivized more than $430 billion in private capital, nearly six times the annual appropriations for HUD, USDA’s Rural Housing Service, SBA, and the CDFI Fund combined, according to a recent report issued by the National Association of Affordable Housing Lenders (NAAHL).
“Without housing and community development funding at the scale provided through CRA-incentivized loans and investments, our deficits in affordable housing and community infrastructure would be even greater,” the report said. Nowhere is this more important than in rural areas most often served by smaller banks. “Rural communities and smaller markets would be especially adversely impacted if banks with less than $30 billion in assets reduce CRA lending and investments,” the NAAHL report said.
CRA is one of the most important incentives encouraging banks to invest in affordable housing and community development in low‑ and moderate‑income communities, including through the Low‑Income Housing Tax Credit (LIHTC). LIHTC investment by banks is often closely tied to CRA consideration. When banks receive clear CRA credit for LIHTC equity or debt, they are more willing to participate in complex, lower‑margin deals. In small cities and rural areas, where the number of potential investors is limited and transaction volume is low, that incentive is especially important.
These smaller markets frequently depend on a handful of small banks that understand the local context and are willing to underwrite LIHTC properties that may not meet the scale or yield targets of large metropolitan deals. When CRA credit is stable and predictable, banks have a strong reason to remain in those markets. An ill-conceived NPR that weakens or narrows the value of community development activity would hit smaller markets hardest, making it more difficult to finance affordable rental homes in communities that already struggle to attract sustained private capital.
In nearly 100 consultations with stakeholders in 2017, most of which I personally participated in, not a single participant asked for the elimination of CRA or for weakening it. They called for a framework that is more transparent and predictable while retaining flexibility to support real‑world community investment. They also made clear that only a nonpartisan, broadly supported CRA regime is likely to endure beyond changes in political control, avoiding the constant threat of regulatory whiplash.
No changes of this magnitude should be attempted without all three agencies in agreement, and certainly not on a compressed timetable that limits serious public input. Any significant restructuring of CRA should begin with an Advance Notice of Proposed Rulemaking to ensure that banks, investors, housing providers, CDFIs, civil rights advocates, rural stakeholders, and others can assess likely consequences before specific regulatory text is drafted.
NHC has long stated that any new CRA regulatory regime must:
- Increase investment in communities that are currently underserved;
- Benefit more low- and moderate-income people, particularly people of color, who live in those communities;
- Ensure that CRA lending and investment does not lead to displacement of the very people it is meant to help; and
- Make both bank performance and government enforcement more transparent and predictable.
The new rule proposed by the FDIC and the OCC achieves none of those objectives. This is why we have urged that the proposal be withdrawn and all three regulators work collaboratively with Congress, financial institutions, community organizations, and other stakeholders to develop any future CRA reforms through a transparent, inclusive process. At a time when the nation faces significant housing affordability challenges, policymakers should be focused on creating a stable, durable regulatory framework that encourages long-term investment, expands access to responsible credit, and strengthens communities. Preserving a strong and effective Community Reinvestment Act remains essential to achieving those goals.