Today, the Consumer Financial Protection Bureau (CFPB) published a new analysis on state Community Reinvestment Act laws, highlighting how states ensure financial institutions' lending, services, and investment activities meet the credit needs of their communities. The report examined the laws of seven states (Connecticut, Illinois, Massachusetts, New York, Rhode Island, Washington, West Virginia) and the District of Columbia, and found that many of those states adopted laws similar to the federal Community Reinvestment Act in decades following the 1977 passage of the landmark federal anti-redlining law.

“The financial market has changed considerably since the passage of the Community Reinvestment Act, and nonbanks are now capturing a large share of the mortgage market,” said CFPB Director Rohit Chopra. “States have responded by creating reinvestment obligations for mortgage companies and have tailored state reinvestment requirements to meet the needs of their local communities.”

While the federal Community Reinvestment Act law applies strictly to banks, state reinvestment laws can apply to a wide range of financial institutions, including nonbank mortgage companies. Banks now originate and hold a much smaller share of outstanding mortgage debt than they did when the legislation was originally enacted. In 1977, banks held 74% of outstanding mortgage debt. By 2007, this share had declined to just 28%. As of 2021, nonbank mortgage companies originated 64% of conventional home purchase mortgage loans, compared to the 25% originated by banks.

Key findings of today’s report are:

• Some states apply an affirmative lending, service delivery, and investment obligation to mortgage companies, in addition to deposit-taking institutions. Most state Community Reinvestment Acts adopted shortly after the passage of the federal law in 1977 applied only to banks. Several states, including Massachusetts and New York, later expanded their state law to cover mortgage companies.
• Some states conduct independent examinations of lending-, services-, and investment-related performance, while other states review federal performance evaluations in conjunction with additional state-designated factors. In some states, performance evaluations are periodic, while other states review a financial institution’s performance in response to an application for a merger, branch, license, or other activity.
• Enforcement mechanisms include limitations on mergers, acquisitions, branching activities, and licensing, but some states have adopted additional measures. Like the federal Community Reinvestment Act, none of the state laws reviewed explicitly provide for the ability to issue civil monetary penalties or structural remedies for failing to meet state reinvestment requirements.
• Some states collect and consider information beyond what is required under the federal Community Reinvestment Act to evaluate lending, services, and investment performance in their state. Most states rely on existing data, such as Home Mortgage Disclosure Act data for mortgage lending, or federal Community Reinvestment Act data for small businesses or small farms, to complete their evaluations. At least one state, New York, requires additional small business lending data reporting beyond what is required by the federal law.
• State Community Reinvestment Acts have been amended from time to time in response to changing markets. Many state laws were initially passed shortly after the enactment of the federal Community Reinvestment Act in 1977. Just as the federal law has been revised since its passage, state reinvestment laws have been amended to cover additional types of financial institutions, collect additional data to better understand financial markets, and address other state-specific needs.

When implementing their state community reinvestment laws, states also use information from federal regulators, such as mortgage, small business, and small farm data, or consider violations of federal laws in their review of a financial institution’s reinvestment performance.

Read the report, State Community Reinvestment Acts: Summary of State Laws.

Consumers can submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

Employees who believe their companies have violated federal consumer financial protection laws are encouraged to send information about what they know to whistleblower@cfpb.gov.