Local banks holding loans they made were never the problem. They maintained standards. If your bank was in a CRA area then that would have been a problem for you but generally those areas were not a widespread issue and the “borrowers” would have gone with a wall street backed NINJA loan after about 2002/2003 and CRA lending would have dried up.
CRA probably got its start because of what had been going on here in SoCal. Banks had branches in communities like Watts and Inglewood where they took in deposits from customers, but they wouldn’t extend loans to these same customers. Instead they would loan only in Beverly Hills and West Los Angeles.
The CRA originally said that if you take in deposits from a certain community, you need to lend a portion of those deposits back to customers in that community. A legitimate gripe from their local customers, but like most things that the federal government gets into, it was just another program for leftists to hijack and abuse.
But if it was as bad as some claim they need to ask why Bush 43 made no attempt to reform CRA. They often conflate his attempt to reform Fannie Mae with subprime and the CRA but it had nothing to do with that. The Fannie Mae issue was a debt to equity argument- the belief that Fannie was insufficiently capitalized. Fannie had also been cooking the books in order to get higher bonuses for its executives. But Dubya never once complained about subprime lending. He in fact encouraged it with the American Dream Downpayment Initiative.