October Research and Dodd Frank Update hosted industry experts on a recent webinar to discuss the nuances and utilities of special purpose credit programs (SPCPs).
This webinar was joined by industry experts Tai Christensen, co-founder, chief diversity officer, and public relations officer for Arrive Home, a “social enterprise facilitating homeownership to underserved communities;” Troy Garris, managing partner at Garris Horn; and, Suzanne Garwood, head of home lending and originations counsel at JPMorgan Chase.
SPCPs, according to the Department of Housing and Urban Development (HUD), are a type of credit assistance program expressly authorized by law for an economically disadvantaged class of persons.
“This language [from HUD) came out some years ago, and there was still a lot of confusion about what actually quantified as a special purpose credit program,” Christensen explained. “So then in December of 2021, it added additional language to clarify even further stating that under [Equal Credit Opportunity Act] (ECOA) special purpose credit programs are recognized as a mechanism that financial institutions can use to open the door to homeownership for underserved populations who have been historically denied that opportunity. A special purpose credit program is a special type of lending program that allows lenders and other groups to direct financial assistance to groups that have been historically locked out of homeownership.”
She goes on to discuss the importance of educating those that can utilize SPCPs, because, from her experience, knowledge of these available programs is lacking in those communities they are designed to benefit.
“A lot of times, that means having people that look like the minority community that you wish to serve, on your board, in your offices, on your staff to go into these communities and talk about these resources that are available,” Christensen added.
“I think there is an educational necessity for the lenders themselves, because there are a lot of programs – especially like the [downpayment assistance] type – that you have,” Garris said. “It’s not necessarily dedicated to just specific banks. A lot of organizations have services that the lenders don’t even think about, but everybody is now currently thinking about how to make money to stay alive during this fairly brutal market.”
Garris added: “I see it as both a risk assessment and management concept, but it’s also opportunity. And every day my law firm deals with mortgage lenders. And every day, I’m talking to people who say that, especially right now, this market is very rough, and how do we find business? In a situation where there’s very little housing inventory, and the rates are through the roof. Well, part of the solution could be that you figure out ways to do business differently.”
SPCPs and the Community Reinvestment Act share a similar mission, Garwood explained.
“Before you even start your journey with an SPCP, you need to have buy in from the top, and the buy-in from the top starts, with us, probably with [JPMorgan Chase CEO] Jamie Dimon. We have, I believe, a $30 billion racial equity commitment out there,” she said. “So, part of our racial equity commitment is maintaining standing up an SPCP, it is meeting our CRA goals. So, it is this whole host of things that we’re doing. So, I would think of your CRA obligations, and your SPCPs as being sort of part and parcel, they may be a little bit separate, but they certainly are part of your journey.”
Garwood goes on to outline the processes of setting up an SPCP and some of the ways JP Morgan Chase has been able to use that to help better serve customers.
To watch the full webinar on special purpose credit programs, click here or visit www.doddfrankupdate.com.