Introduction

The functional role of financial regulations in fueling the current financial crisis is being hotly

discussed by scholastics, policymakers, and politicians. A focal bit of this warmed debate relates

to the role performed by the Community Reinvestment Act (CRA) in the growth of the financial

crisis and, specifically, its effect on pre-crisis mortgage lending standards. Though the community

groups and regulators strongly support the act, financial experts remain distributed in their

perceptions regarding the role of the CRA in lowering the underwriting standards. This level-

headed discussion is best shown by the perspectives taken by financial analysts who recommends

that the CRA act was a channel by which a U.S. Congress, stressed over developing income

disparity, towards growing low-income housing, combined with the surge of foreign capital

inflows to expel any discipline on the home loans. Conversely, many business analysts contend

that the Community Reinvestment Act (CRA) of 1977 was irrelevant to the subprime boom.

However, this paper provides detailed discussion about Community Reinvestment Act (CRA) of

1977, Fannie Mae and Freddie Mac and housing bubble in the following section.

Conclusion:

The Community Reinvestment Act (CRA) was approved in 1977 and has experienced some

revisions. Overall, it has expanded loaning to low-and-moderate-income borrowers and groups.

The Community Reinvestment Act (CRA) has likewise rolled out significant improvements in the

behavior of numerous financial industries and federally regulated financial institutions. They have

been trying different financial instruments to achieve low-and-moderate-income markets. They

have made banks consortia. In conclusion, this study has looked into the Community Reinvestment

Act (CRA) and related legislations, summarized pieces of literature which have evaluated the

effect of the Community Reinvestment Act (CRA), and related outcomes. One additional
unexpected result of extending the access to finance to low-and-moderate-income borrowers is on

the supply side will be the expanding frequency of the predatory lenders. Whereas the predatory

lending might be beneficial and increase access as well, its general effect might be negative on the

borrowing community. It may serve as a new issue for the efficient market discussion.