Owning a home has long been one of the most effective ways to build wealth. But for many lower-income renters – especially for Black families and other people of color – the leap from renting to owning can seem nearly impossible. For many, one of the biggest obstacles to qualifying for a mortgage is insufficient credit history. Today, Fannie Mae is taking an important step forward to change that. We are making a groundbreaking update to our automated mortgage underwriting system, Desktop Underwriter®, to allow lenders to consider a history of recurring rent payments in assessing eligibility. It seems obvious that if someone is paying rent consistently it's likely they could and would pay their mortgage consistently, too. Yet we believe this will be the first time any large-scale automated mortgage underwriting system will leverage electronic bank statement data to consider positive rent payment history.

Virginia Community Capital Bank in Richmond prizes the clean energy lending program it launched five years ago. But as a small community development financial institution, it lacked the resources to find socially minded depositors at the scale it wanted to fund its solar loans. Ando, a challenger bank that focuses on sustainability, is finding them instead. The San Diego fintech has the trappings of a typical neobank: no monthly fees, early direct deposit and interest rates that grow in exchange for referrals. But its mission is to fund clean energy, sustainable agriculture and other green loans made by partner banks, of which the $233 million-asset Virginia Community Capital (which markets itself as VCC) is the first. “It’s always been my dream at VCC to match impact-minded deposit customers directly to the solar loans that we do,” said Bill Greenleaf, the bank's real estate lending team manager and clean energy loan officer. “We just don’t have the technology infrastructure or the marketing resources to find individual depositors that want to focus on clean energy.”

As the COVID-19 pandemic began to rattle businesses nationwide and the federal government launched its Paycheck Protection Program, businesses in Maryland and beyond struggled to process their applications. The PPP program was launched in April 2020, but some businesses said their applications were delayed — in part because they could not find banks that accepted applications, and many banks weren't set up to do so. John Lewis, president and chief operating officer of the Harbor Bank of Maryland, said his bank not only accepted PPP applications, but his employees went out of their way to help qualified business owners, regardless of whether they were Harbor Bank customers. Harbor Bank — co-founded by Baltimore native Joseph Haskins Jr. 39 years ago — is the only Black-owned and -managed commercial bank in Maryland. Haskins is the chairman and CEO of the company, which was founded to provide capital to individuals who historically lacked it, Lewis said. Headquartered in downtown Baltimore, Harbor Bank now has six locations, mostly in the city.

No one can reasonably deny that when the overall economy gets a cold, low- and moderate-income individuals and neighborhoods get the flu, largely through no imprudence of their own. History proves that lower-income families, particularly those comprising people of color, get fired first and rehired last. As a result, no matter how hard they work to save, they're almost always left a step behind. The Great Recession was a clear example: While a range of big banking institutions were given taxpayer bailouts, more modest communities were left with a Sisyphean boulder. As we emerge from the pandemic, the cycle is apt to repeat itself. One tool we should use to address this perennial problem has emerged from the world of finance. Despite decades of often fruitful work inducing ordinary banks to serve lower-income communities, many poorer neighborhoods today remain inundated with check-cashing storefronts and pawnbrokers. Many lower-income borrowers have little choice but to deal with loan sharks who make it unreasonably expensive to build real credit and to climb the economic ladder. Fortunately, beyond encouraging banks to serve these lower-income communities, a third alternative has emerged. Appearing to consumers much like an ordinary bank, but operating against a different set of incentives, community development financial institutions, or CDFIs, such as Industrial Bank in Washington, D.C., and Southern Bancorp in Arkansas, are proving to be an indispensable tool in the fight against endemic poverty. But they have yet to be scaled. We need to take several steps to drive CDFI growth and success around the country.