Keywords: CRA, mortgages, banking, profit
Abstract: The Community Reinvestment Act (CRA) requires lenders ``to
help meet the credit needs of the local communities in which they
are chartered, consistent with the safe and sound operation of
such institutions.'' For proponents of efficient markets, the CRA
is a threat to lender profitability. For others, the CRA has
the potential to increase profitability.
We examine the relative profitability of commercial banks
that specialize in mortgage lending in lower-income neighborhoods
or to lower-income borrowers using three different techniques,
and find that lenders active in lower-income neighborhoods and
with lower-income borrowers appear to be as profitable as other
mortgage-oriented commercial banks.
Full paper (110 KB PDF)
| Full paper (176 KB Postscript)
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Last update: July 16, 1997