Grant Winner | Housing Finance

Center for NYC Neighborhoods

New York State

Underwriting for Good aims to rewrite who gets to be a homeowner in the United States by dramatically increasing the amount of credit flowing to families of color with modest means. By harnessing the power of financial technology (fintech), the tool will affirmatively address racial inequity and reduce the racial wealth gap through at-scale, non-discriminatory lending.

A woman standing in a room.

The Center for NYC Neighborhoods began operations amid the 2008 mortgage crisis to help families and communities gain stability. Its mission is to promote and protect affordable homeownership so that middle- and working-class families can build strong, thriving communities. Working through the lenses of racial equity and climate change, the nonprofit seeks to increase opportunities for sustainable homeownership, particularly for Black and Brown communities.

In its multiple roles, the Center for NYC Neighborhoods serves as a hub for engaging homeowners, a direct service provider and a policy advocate. To date, their efforts have yielded: 

  • 3,000+ loans
  • Support for 150,000 homeowners 
  • $109 million in direct assistance to New York families

The Center also operates Sustainable Neighborhoods LLC, a wholly owned subsidiary CDFI to fill lending-market gaps for people with low and moderate incomes, who might be categorized as higher-risk borrowers. While Black families are just 9% of homeowners statewide, they represent one-third of Sustainable Neighborhoods' borrowers, demonstrating its commitment to racial equity. 

Father and son standing in front of a house

THE CHALLENGE 

When it comes to traditional mortgage lending, families of color and people with low and moderate incomes historically have been shut out, improperly denied and overcharged. In large part that’s because automated underwriting systems — the algorithmically-based platforms that help determine who can receive a loan and at what rate — are built for people who “fit the profile.” Studies suggest that nearly all of these systems deliver racially discriminatory outcomes.  

The Center's CDFI and other mission-driven lenders have created alternative systems to better serve people of color. But they cannot operate at the scale of conventional lending. Underwriting for Good would automate alternative systems to make credit flow more equitably with the goal of closing the racial wealth gap and increasing homeownership rates among people of color and people with modest means.  

SOLUTION: UNDERWRITING FOR GOOD 

Breakthrough change in mortgage lending is possible and the Center for NYC Neighborhoods is ready to make it happen – by merging best practices in lending with homeowner services and innovation in financial technology (fintech).  

Partnership is key to the innovation’s success. The Center will join forces with value-aligned partners to build an automated underwriting system to be piloted by the State of NY Mortgage Agency (SONYMA), allowing it to reach underrepresented New York borrowers at scale.  

The innovation will use a complex, evolving dataset that provides a comprehensive picture of borrowers — unlike traditional automated underwriting systems that look at FICO scores and more limited datasets. It will also leverage an existing credit-rating tool to deliver a balanced assessment of an applicant’s credit strengths and weaknesses.  

“Today, a single number or credit score can be used to track families and vilify entire communities. In our vision, everyone who has been written out of homeownership will finally share in the American dream.”  
― Christie Peale, Center for NYC Neighborhoods

Automating the most frequently used and accepted third-party alternative credit scoring (e.g., utilities bills and other non-FICO data) promises to deliver uniform, non-discriminatory qualifying results, while significantly reducing processing time for counselors and lenders.  
 
Underwriting for Good is innovative because it’s automated, holistic and responsive in real-time – attributes that hold the key to a life-changing difference for clients who lack credit history or seek to build up their financial strength to become the first homeowner in their family.  

Following previous crises, banks have tightened credit standards that typically pose the greatest harm to families of color. Underwriting for Good would leverage New York State’s lending capacity to ensure an equitable recovery from Covid-19 and provide access to credit to people who are locked out, especially post-crisis. 

Partners: 

  • Mountain View Advisors
  • Aegis LLC
Worker assisting another woman fill out paperwork

INTENDED RESULTS 

By the end of the grant period, Underwriting for Good will be ready to deliver fair, affordable mortgage loans. Five or more nonprofit housing counseling organizations in New York State will have helped design, test, evaluate and streamline the automated system. A completed business plan will show why it performs better than other models, helping draw larger users and investors. 

Looking further ahead, Underwriting for Good’s innovators seek national adoption of the system. Going to scale will create a new supply of mortgage loans in which secondary market investors can invest, freeing up additional liquidity to lending institutions – and potentially enabling credit access to millions of borrowers of color who will gain the opportunity to build wealth through homeownership.

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