Difficulties in Evaluating the Effectiveness of the Community Reinvestment Act of 1977

In response to a congressional request, GAO tried to perform an evaluation of the effectiveness, economic efficiency, and equity of the Community Reinvestment Act (CRA).

GAO obtained some information on regulatory actions taken by the agencies responsible for CRA implementation and enforcement; however, it found it impossible to conduct a reliable evaluation of the CRA economic impact. GAO found that: (1) the results of studies which attempted to determine whether lending institutions discriminate were mixed; (2) there were insufficient data to determine how aggregate lending patterns have changed since the enactment of CRA; (3) measures now used to assess compliance with CRA were not available before CRA enactment; (4) new legislation, higher interest rates, and the increased availability of Federal Housing Administration and Veterans Administration mortgages since the enactment of CRA have made it impossible to determine to what extent changes in lending patterns are the result of CRA; (5) few protests have been filed which relate to CRA; (6) rarely have the protests resulted in denials of applications for deposit facilities; (7) in many of the protested cases, the agency and the lending institution negotiated changes in behavior; and (8) lending institutions may have altered their lending behavior in order to avoid regulatory problems. However, GAO did find that the four agencies responsible for regulating CRA have: (1) issued regulations; (2) provided information on CRA actions in their annual reports even though relatively few matters involved CRA issues; and (3) jointly developed a rating system that measures lending institution compliance with CRA.