Community Reinvestment Act

Posted in Finance, Accounting and Economics Terms, Total Reads: 314
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Definition: Community Reinvestment Act

This act was enforced in the US in 1977 by Congress. This act was enacted with the motive to encourage depository institutions. These kind of institutes would work on to meet the credit needs of surrounding communities. It needs to focus on communities which fall in low and moderate income groups in the society.


The act needs regulators to check the record of each and every bank or accelerate in helping to meet its obligations towards the communities. These records will then be used in evaluating applications for future approval of business decisions like mergers of bank, acquisitions, charters, branch openings and deposit facilities.

 

Mortgage lenders’ originated CRA loans are being purchased in the secondary market. These loans generally trade at a premium price in the secondary market. Traders always search and find overlooked individual CRA loans that can be extracted and be sold for a premium in the market. These are generic packages.

 

Advantages:

• Promote housing and economic opportunity in the economy

 

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