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 FINANCIAL CRISIS INQUIRY COMMISSION REPORT

Contrary to this view, two Fed economists determined that lenders actually made
few subprime loans to meet their CRA requirements. Analyzing a database of nearly
 million loans originated in , they found that only a small percentage of all
higher-cost loans as defined by the Home Mortgage Disclosure Act had any connec-
tion to the CRA. These higher-cost loans serve as a rough proxy for subprime mort-
gages. Specifically, the study found that only  of such higher-cost loans were made
to low- or moderate-income borrowers or in low- or moderate-income neighbor-
hoods by banks and thrifts (and their subsidiaries and affiliates) covered by the CRA.
The other  of higher-cost loans either were made by CRA-covered institutions
that did not receive CRA credit for these loans or were made by lenders not covered
by the CRA. Using other data sources, these economists also found that CRA-related
subprime loans appeared to perform better than other subprime loans. “Taken to-
gether, the available evidence seems to run counter to the contention that the CRA
contributed in any substantive way to the current crisis,” they wrote. 
Subsequent research has come to similar conclusions. For example, two econo-
mists at the San Francisco Fed, using a different methodology and analyzing data on
the California mortgage market, found that only  of loans made by CRA-covered
lenders were located in low- and moderate-income census tracts versus over  for
independent mortgage companies not covered by the CRA. Further, fewer than 
of the loans made by CRA lenders in low-income communities were higher priced,
even at the peak of the market. In contrast, about one-half of the loans originated by
independent mortgage companies in these communities were higher priced. And af-
ter accounting for characteristics of the loans and the borrowers, such as income and
credit score, the authors found that loans made by CRA-covered lenders in the low-
and moderate-income areas they serve were half as likely to default as similar loans
made by independent mortgage companies, which are not subject to CRA and are
subject to less regulatory oversight in general. “While certainly not conclusive, this
suggests that the CRA, and particularly its emphasis on loans made within a lender’s
assessment area, helped to ensure responsible lending, even during a period of over-
all declines in underwriting standards,” they concluded. 
Overall, in , , and , CRA-covered banks and thrifts accounted for at
least  of all mortgage lending but only between  and  of higher-priced
mortgages. Independent mortgage companies originated less than one-third of all

mortgages but about one-half of all higher-priced mortgages. Finally, lending by
nonbank affiliates of CRA-covered depository institutions is counted toward CRA
performance at the discretion of the bank or thrift. These affiliates accounted for an-
other roughly  of mortgage lending but about  of high-price lending.
Bank of America provided the FCIC with performance data on its CRA-qualify-

ing portfolio, which represented only  of the bank’s mortgage portfolio. In the
end of the first quarter of ,  of the bank’s  billion portfolio of residential
mortgages was nonperforming:  of the  billion CRA-qualifying portfolio was
nonperforming at that date.
John Reed, a former CEO of Citigroup, when asked whether he thought govern-
ment policies such as the CRA played a role in the crisis, said that he didn’t believe