Banking Reform Might Chill Affordable Housing Investment

When federal regulators set out in the spring to buttress a 45-year-old law aimed at ensuring banks serve the full spectrum of residents in the communities where they operate without bias or discrimination, they may have unintentionally laid the groundwork to diminish banks’ vital role as investors in affordable housing.

The Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency jointly issued a long-awaited, nearly 700-page notice of proposed rulemaking on May 5 comprising dozens of measures the agencies said would boost the effectiveness of the 1977 Community Reinvestment Act and further curb practices like redlining, which makes it harder for people of color to obtain home mortgages or insurance.