Anecdotal evidence that the Community
Reinvestment Act (CRA) influences the lending behavior of financial
institutions has not been uniformly supported by empirical research.
We revisit this issue by evaluating changes in low-income mortgage
lending at commercial banks over the 1992 –96 period. Our empirical
results fail to support a hypothesis that banks respond to public and
regulatory pressure exerted as a result of a downgrade in CRA rating
by increasing low-income mortgage lending. The findings are
consistent with the contention that during this period regulators
stressed adjustments in the lending process of banks (e.g.,
documentation of lending programs and efforts directed at targeted
markets) more than lending performance. The findings underscore the
importance of regulatory efforts made later in the decade to more
closely link enforcement of the CRA to lending outcomes.