Underwriting for Racial Justice Lender Pilot Program

Underwriting for Racial Justice Lender Pilot Program

Status: Launched June 28, 2023; two-year pilot program

Program Overview:
Beneficial State Foundation launched a two-year pilot program composed of 20 diverse lenders focused on dismantling racially-inequitable underwriting practices in the financial industry and increasing capital access and wealth for people of color.

Purpose:
The pilot program addresses how the U.S.'s history of systemic racism has shut people of color out of the financial system, resulting in fewer home, business, and personal loans and hampering their ability to build long-term wealth and financial stability.

Focus Areas:

Reforming lending underwriting standards (the standards set by lenders to assess risk)

Developing anti-racist underwriting approaches

Increasing capital access for people of color

Building long-term wealth and financial stability for underrepresented borrowers

Key Underwriting Approaches:

Evaluating credit histories instead of using hard credit score cutoffs

Diminishing the significance of credit scores in loan evaluations

Improving chances of loan approval for people with lower credit scores

Establishing programs designed to increase lending opportunities for marginalized communities

Reconsidering factors like smaller down payments and higher debt-to-income ratios that disproportionately affect nonwhite borrowers

Program Support Provided:

Tools, templates, and technology for implementing new underwriting approaches

Peer-group spaces for sharing experiences and results

Evaluation of loan performance and impacts on borrowers, communities, lending institutions, and the financial industry

Policy or regulatory recommendations to foster more equitable practices

Participating Lenders (20 total):
1. Beneficial State Bank
2. Berkshire Bank
3. BetterFi
4. Chehalis Tribal Loan Fund
5. Eastern Bank
6. Enterprise Community Loan Fund
7. Leech Lake Financial Services
8. LISC
9. Montecito Bank & Trust
10. New Orleans Firemen's Federal Credit Union
11. REDF Impact Investing Fund
12. Rivermark Community Credit Union
13. Texas National Bank
14. Twin Cities Habitat for Humanity Lending Inc
15. Urban Redevelopment Authority of Pittsburgh / Invest PGH
16. Vermont Community Loan Fund
17. Working Solutions CDFI
18. Washington Area Community Investment Fund
19. Washington State Employees Credit Union
20. (One additional lender)

Selection Process:
Beneficial State Foundation received applications from nearly 40 stellar institutions and sought to include:

Diversity of lender types

Diversity of loan types

Diversity of geographies

Demonstrated commitment to the cause

Additional Resources for Non-Selected Applicants:
All applicants not accepted will have exclusive access to program guides, templates, and other crucial resources.

Expected Outcomes:

High-performing and more racially diverse lending portfolios

Greater capital access for people of color

Industry-wide learning and change

Better policy or regulatory recommendations

Leadership:
Erin Kilmer Neel, Executive Director of Beneficial State Foundation

Contact:
Beneficial State Foundation