and similar practices ( see lacker, 1995 ). the federal reserve's flow of funds accounts did not even record private securitization activity until the early 1980s, and purchases by federal housing agencies, which were focused on government - backed loans and lower - risk conventional loans, represented less than 1 percent of total outstanding home mortgage debt in the years preceding enactment of the cra. analysis of decennial census and home mortgage disclosure act data indicates that lower - income areas have about half the number of owner - occupied homes and home purchase loans in a given year than do higher - income areas. although information from the period before the cra is not available, a review of credit records from one of the national credit - reporting agencies today supports this conjecture, as it finds that individuals in lower - income areas have, on average, substantially shorter credit histories and only about half as many credit accounts. also, nearly 40 percent of the individuals in lower - income census tracts cannot be scored, a proportion nearly three times that found in higher - income areas. this information comes from analysis by staff members of the federal reserve board in conjunction with a report to the congress ( board of governors of the federal reserve system, forthcoming ). the low - cost summary measures of credit history that have gained widespread market acceptance today did not emerge until 1989, when fair isaac and company developed the fico score. for a listing of these rules, see amel and keane ( 1986 ). private investment activity. from an economic perspective, the cra can be interpreted as an attempt to rectify market failures - - for example, by inducing banks to invest in building the knowledge and expertise necessary to lend profitably in lower - income neighborhoods. similarly, to the extent that the cra encouraged coordinated or simultaneous efforts by banks to lend in underserved areas, it had the potential to reduce the first - mover problem. the debate surrounding the passage of the cra was contentious, with critics charging that the law would distort credit markets, create unnecessary regulatory burden, and lead to unsound lending. partly in response to these concerns, the congress included little prescriptive detail in the law. instead, the cra simply directs the banking regulatory agencies to ensure that banks serve the credit needs of their local communities in a safe and sound manner. in effect, the agencies were left with considerable discretion and flexibility to modify the rules in light of changes in the economy and in financial markets ( garwood and smith

scope for risk - based pricing of mortgages. securitization of affordable housing loans expanded, as did the secondary market for those loans, in part reflecting a 1992 law that required the government - sponsored enterprises, fannie mae and freddie mac, to devote a percentage of their activities to meeting affordable housing goals ( hud, 2006 ). a generally strong economy and lower interest rates also helped improved access to credit by lower - income households. bankers were also gaining experience in underwriting and managing the risk of lending in lowerincome communities. after years of experimentation, the managers of financial institutions found that examinations were conducted to evaluate an institution's compliance in five performance areas, comprising twelve assessment factors. the examination culminated in the assignment of a rating ( outstanding, satisfactory, needs to improve, or substantial noncompliance ) and a written report that became part of the supervisory record for the institution. these loan portfolios, if properly underwritten and managed, could be profitable. in fact, a federal reserve study found that, generally, cra - related lending activity was at least somewhat profitable and usually did not involve disproportionately higher levels of default ( avery, bostic, and canner, 2000 ; see also board of governors, 1993 ). moreover, community groups and nonprofit organizations began to take a more businesslike, market - oriented approach to local economic development, leading them to establish more - formalized and more - productive partnerships with banks. community groups provided information to financial institutions on the needs of lower - income communities for credit and services, offered financial education and counseling services to community members, and referred " bankable " customers to partner banks. specialized community development banks and financial institutions with the mission of providing financial services and credit to lower - income communities and families emerged and grew. policy developments bolstered the infrastructure and funding of community development lending organizations. notably, the passage of the community development financial institutions ( cdfi ) act of 1994 created the cdfi fund at the department of treasury. the expansion of cdfis provided banks with access to new opportunities to finance community economic development. other initiatives, such as the federal low income housing tax credit and new markets tax credit programs provided vehicles for investing in affordable housing development and economic revitalization in distressed communities. even as cra - related lending became more extensive and more market - based, concerns were expressed about the implementation of the law. financial institutions complained about compliance costs ( elliehausen, 1998 )