The ongoing experiment with “regulation from below”: Expanded reporting requirements for HMDA and CRA

The Home Mortgage Disclosure Act (HMDA) and Community Reinvestment Act (CRA) were enacted in the 1970s to curb redlining, the discriminatory lending practice whereby financial institutions refuse to make mortgage loans to certain neighborhoods based on the racial composition of those areas or the age of their housing stock. HMDA and CRA implicitly sanctioned an important role for local citizen monitors, whose “regulation from below,” as it has been termed, was believed to be needed to augment the formal enforcement apparatus. In 1989, Congress amended both of these laws by expanding publicly available information on the lending practices of financial institutions. The paper reviews the early experiences with the new requirements and suggests some of the factors likely to determine whether grassroots organizations seek further reforms. While the use of “de facto” bank examiners succeeded more than many knowledgeable observers expected, it remains to be seen whether community‐based watchdogs can keep pace with the rapidly changing environment for CRA and for banking in general. As for the 1989 amendments to the Acts, it is still too early to determine the full impact of these changes on community lending.