ABSTRACT
Banks and depository institutions arguably comprise one of the most important sources of funding for community development. Community development is a form of economic development in areas with weak, declining, or impaired local economies. Since passage of the Community Reinvestment Act (CRA) of 1977 (see Box 9.1), banks have had increasingly defined and expanded obligations to finance community development. Community development can include things such as low down-payment mortgages, services to consumers and nonprofits, and accounts designed for low-income households. It also includes direct investments in affordable housing and commercial real estate in lower-income and lower-wealth communities, as well as indirect investments. Indirect investments may be made via an intermediary in predevelopment financing or through equity-type investments that do not have defined exit strategies or finite financing terms at the outset. In this chapter, we explore whether the problems facing the nation’s financial institutions after the mortgage crisis have influenced how banks participate in and plan to support community development finance activities.
