WASHINGTON - Supporters and opponents of the Community Reinvestment Act each declared victory Monday when the Federal Reserve Board reported that most banks make money lending to struggling communities but have to cope with higher delinquency rates in the process.

The central bank sent Congress its long-awaited study of the profitability and performance of CRA-related lending last year at the nation's 500 largest banking organizations. The study, required by the Gramm-Leach-Bliley Act of 1999, was part of a package of compromises involving reinvestment requirements that helped propel the landmark law's enactment.

Democrats pointed to data showing that 82% of the banks surveyed turned a profit on the $56 billion of CRA-related mortgages they originated last year.

"[T]he basic message is clear: CRA is profitable. It shows a win-win situation with CRA working for communities and for financial institutions," Maryland Sen. Paul Sarbanes, the Senate Banking Committee's top Democrat, said. "We now have substantial confirmation of the continued success and effectiveness of the Community Reinvestment Act."

Senate Banking Chairman Phil Gramm, who has argued that banks should not be forced to make loans that are significantly riskier than normal credits, said relative profitability is the more telling statistic. More than 60% of banks said CRA home loans were less profitable than other lending.

"CRA lending is significantly less profitable than ordinary lending," Sen. Gramm said in a statement. "I am astounded by the data that shows every third dollar lent through these special deals is lent at a loss."

He highlighted the survey findings that 51% of the banks surveyed - and 88% of the large ones - said that the rates of delinquencies between 30 and 90 days are higher for CRA-related loans.

"The study demonstrates that CRA lending as it is now practiced is credit allocation that generates loans with higher delinquency rates and lower profit profiles than loans generated through normal channels," the Texas Republican said.

However, 53% of those same institutions said CRA loan recipients default as often as other borrowers.

"It's encouraging that the default rate is significantly less than the delinquency rate," Sen. Sarbanes said in an interview. "Those are pretty good figures when you are talking about borrowers who have not had the chance to participate in sharing in our country's economic benefits."

Karen Shaw Petrou, president of the consulting firm ISD/Shaw Inc., said the higher delinquency rates actually support the CRA advocates' argument that banks need government encouragement to make riskier loans to low- and moderate-income communities.

"The findings suggest that CRA is performing as its advocates had hoped," she said. "It may validate CRA advocates' assertion that without CRA, banks might not have been encouraged to look at the business" of lending to nontraditional customers.

"It also validates the banking industry's perception that it was not discriminating" before CRA was enacted in 1977, she said. "It's a tougher business for them, and they needed to figure out how to package the loans and sell them profitably. Like subprime lending, it's quite profitable despite the higher delinquency rates and servicing costs."

The Fed, which was four months late in completing the 140-page report, blamed the delay on banks' inconsistent and incomplete responses that had to be individually validated. The report cited similar reasons in warning that the "quantitative estimates of performance and profitability presented … in this report must be viewed with caution."

"Banking institutions generally do not separately track the performance and profitability of CRA-related lending," the report said.

Sen. Gramm vowed to call for a more in-depth report next year.

CRA supporters countered that the data should quell further censure of the act. "If criticism is related to the factual situation, it should quiet the critics," Sen. Sarbanes said.

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