Investing in a Just Economy

For nearly 30 years, NCRC has worked to create a just economy. We believe capital of various forms must be engaged in building an equitable and fair economy. There is a legal obligation for banks and other financial institutions to invest in and lend in low-and moderate-income communities.There is also a moral obligation to address the racial wealth divide and the overall concentration of wealth in society.

Our nation faces the fallout of continuing crises including racial injustice, economic insecurity public health and climate crises.This moment is not the first time we have grappled with these issues, but their confluence during a time of pitched concern over what it means to participate in a just economy has sparked a critical review of our laws, regulations and corporate practices not seen in decades.

To ground our thinking, we look to tested measures of shared prosperity, and the outcome of these measures falls woefully short. Growing income and wealth inequality, a Black homeownership rate as low as when the Fair Housing Act was passed in 1968, and a pandemic that has left, business owners, and those they employ, in greater financial insecurity, calls for bold action now.

Civil rights, consumer, and fair housing advocates have urged ambitious policy goals to the Biden Administration, the 117th Congress, and the nation’s business community, touching on every sphere of American society, including housing and access to credit.  We can make the progress we need by refocusing our energy and resources to make better use of the tools we have and developing new ones. As we do this work, we must aim towards investments that are local in nature, reflect the future of our financial markets, restore our commitment to fair lending and elevate our commitment to affordable housing, and wealth development.

Invest Local: Strengthening credit and capital and development in local communities

With the release of the Federal Reserve Board blueprint for the Community Reinvestment Act (CRA) modernization in fall 2020, there is a once-in-a-generation opportunity to bring the regulations implementing this critical anti-redlining law up-to-date.The proposal provides the three banking regulators with an interagency path forward and means to reverse and replace the harmful 2020 CRA rule finalized by the OCC at the end of the Trump administration.Keeping bank evaluations local by creating local assessment areas responsive to community needs, augmenting the evaluation of bank services and community development loans and investments with better data, increasing the rigor of exams must be a part of that path. Likewise, the equity challenges that the nation faces cannot be solved by banks alone. The obligation to invest locally and increase access to credit and capital in the communities hardest hit by the pandemic should apply broadly throughout the financial services sector—to mortgage companies, investment firms, credit unions, and insurance companies.

Invest Forward: Ensuring advances in technology and industry do not inhibit needed progress in financial stability, housing and homeownership

Protecting consumers and homeowners from abusive practices, keeping renters in their homes and preserving homeowners’ hard-won equity remains front and center as we work towards a just recovery.We must continue our work to ensure that financial technology innovation does not come at the expense of fair lending and fair rates.Online lenders and branchless banks do not lose their obligations to reinvestment in the communities where they do business. We must hold a strong eviction moratorium in place to keep renters in the homes, give every homeowner who needs one access to a mortgage forbearance and potentially a mortgage payment reduction, and fully fund our front-line housing counselors to assist where they are vitally needed.

Invest Equitably: Build back better the nation’s commitment to fair housing and fair lending and an inclusive economy

The Trump Administration waged a years-long campaign to weaken or set aside many of the nation’s critical fair housing and fair lending requirements, and an equitable recovery means restoring our commitment to equal access to safe housing and fairness in lending.In late 2020, the Trump Administration finalized a rule that made it harder to bring discrimination claims under the Fair Housing Act and weakened essential tools designed to ensure that cities that receive federal funds take steps to reduce residential segregation.In the first days of the Administration, President Biden issued executive orders signaling that his Administration would commit to restoring these critical fair housing tools.Under the leadership of Secretary Marcia Fudge, the Department of Housing and Urban Development, has already moved to implement these orders.But much more needs to be done. 

The Affirmatively Furthering Fair Housing rule should be restored using the 2015 rule as a starting point, and the Consumer Financial Protection Bureau should strengthen the application of disparate impact protections for credit transactions and implement the small business data transparency requirements mandated by Dodd-Frank over ten years ago without delay. Congress must strengthen the enforcement of the Equal Credit Opportunity Act. Financial institutions should expand the use of Special Purpose Credit Programs that can target historically disenfranchised groups.Finally, the banking regulators also have an opportunity to use their authority under the CRA statute to develop a more race-conscious CRA and explicitly consider race and ethnicity in performance evaluations, the designation of assessment areas and more.

Invest in Community:Strengthen investment in the infrastructures of housing, community economic development and small business

We need a broad-based and multi-faceted strategy to expand the housing supply and better prepare first-time and first-generation homeowners to close the racial homeownership gap, ensure access to affordable housing, and eliminate housing discrimination.  The nation faces a critical housing shortage that undermines affordability and shuts out too many first-generation homebuyers.  Including affordable housing as part of the infrastructure package enjoys strong bipartisan support among voters, and we look to Congress and the Administration to ensure that a commitment to increasing housing supply remains front and center.¹ But we cannot close the racial homeownership gap without reducing significant barriers to homeownership, including access to a down payment and bridging racial economic inequality as a whole. Finally, products matter.  The GSEs have and must continue to play a leading role in ensuring access to low-cost, safe and sustainable conventional mortgage products.

NCRC and its members stand ready to support bold leadership on the challenges ahead

The election of President Biden and the 117^th Congress are potential watershed moments in the decades-long push to create safe and vibrant communities, make our financial markets fairer and more transparent, and recommit to an expansive view of economic opportunity.NCRC and its grassroots coalition of housing practitioners, housing counselors, community developers and consumer advocates stand ready to do the hard work necessary to move this ambitious agenda forward. We are committed to staying the course until this work is realized in every community across the country.