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Perspectives

Bridging the financial inclusion divide digest

Positioning purpose and profit through financial inclusion

Prioritizing financial inclusion can pave a path forward in every community by offering financial resources and tools that can accelerate individual economic mobility and promote collective economic growth.

Recession concerns ease, economic challenges continue

While concerns about a possible economic recession have eased slightly, the economy continues to face challenges such as a slowdown and elevated interest rates. In our most recent issue, we’re offering a look at recent regulatory advancements with a focus on how regulators are prioritizing greater transparency and improved access to credit and implementing noteworthy changes within FSI. Additionally, the Federal Housing Finance Agency (FHFA) has been steadfast in its ongoing endeavors to ensure housing for all. Explore the digest for insights into how these regulatory developments may affect your business.

Key takeaways

Despite the growing momentum of financial inclusion as a solution for achieving economic parity, a significant amount of unfinished work remains. Moreover, implementing and prioritizing measures that help ensure fair access to financial services for vulnerable groups can result in reduced barriers, improved financial literacy, and less discrimination. In this issue, we highlight various ongoing regulatory initiatives aimed at addressing potential inequities: 

  • The FHFA announced updated Equitable Housing Finance Plans for Fannie Mae and Freddie Mac, aiming to promote fair and affordable housing opportunities.
  • Vice President Harris and the Treasury Department announced more than $1.73 billion to enhance access to capital and financial services in underserved communities, addressing economic disparities.
  • The FHFA issued a final rule amending the Enterprise Duty to Serve Underserved Markets regulation, encouraging Fannie Mae and Freddie Mac to serve low-income and underserved communities. It also proposed a rulemaking on fair lending oversight, signaling increased attention to ensure fair lending practices and prevent discriminatory practices in the housing market.
  • The Treasury Department held roundtable discussions to discuss the American Rescue Plan’s investments in rental assistance for AANHPI communities and engaged with financial institutions serving low-income and minority communities in California.
  • Treasury Deputy Secretary Wally Adeyemo and Counselor for Racial Equity Janis Bowdler attended an ECIP roundtable with UC Investments, discussing the Treasury’s $8.4 billion investment in CDFIs and MDIs. The focus was on expanding financial services in underserved communities, benefiting low-income families, immigrants, and people living in rural areas in California.
Bridging the financial inclusion divide digest | September 2023

Regulatory developments to watch

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The FHFA announced a proposed rule that would formalize the FHFA’s existing practices and programs regarding fair housing and fair lending oversight of its regulated entities. It provides protections for consumers against unfair or deceptive acts or practices and defines underserved communities for the purposes of the Equitable Housing Finance Plans. The proposed rule aims to address barriers of sustainable housing opportunities for the underserved communities by codifying existing FHFA practices in regulating fair lending, fair housing, and the Equitable Housing Finance Plans.

The proposed rule is expected to codify:

  • The FHFA’s fair lending oversight requirements.
  • The requirements for Fannie Mae and Freddie Mac (the Enterprises) to maintain Equitable Housing Finance Plans.
  • The requirements for the Enterprises to collect and report homeownership education, housing counseling, and language preference information from the Supplemental Consumer Information Form (SCIF).

Once implemented, the proposed rule is expected to broaden the requirements for the Enterprises in fair lending compliance and provide greater oversight and transparency toward the Equitable Housing Finance Plans. Further, this should improve the FHFA’s oversight of the Enterprises and banks along with working toward fulfillment of their statutory purpose to provide equitable access to sustainable housing opportunities and a well-functioning housing market for communities spread across the United States.

US Vice President Kamala Harris and Deputy Secretary of the Treasury Wally Adeyemo announced that the US Treasury’s Community Development Financial Institutions (CDFI) Fund has awarded more than $1.73 billion in grants to 603 CDFIs across the country through the CDFI Equitable Recovery Program (CDFI ERP).

These grants are expected to contribute toward strengthening the ability of CDFIs to help low- and moderate-income communities recover from the COVID-19 pandemic and invest in long-term prosperity. Awards provided to CDFIs are focused to expand lending, grantmaking, and investment activity in low- or moderate-income communities and to borrowers, including minorities, who have significant unmet capital or financial service needs.

The $1.73 billion in CDFI ERP funding that is being received by institutions via grants through CDFIs includes banks, holding companies, and credit unions as well as non-depository loan funds and venture funds that are designated as CDFIs by the Treasury Department’s CDFI Fund. These mission-driven institutions are presented with an opportunity to accelerate efforts in America’s distressed and underserved communities toward overcoming the persistent economic effects of the COVID-19 pandemic.

The FHFA updated the Enterprises’ 2023 Equitable Housing Finance Plans, focusing on their safety, soundness, and equitable access to affordable and sustainable housing. During the 55th anniversary celebration of the Fair Housing Act, one of the shared highlights was that the Enterprises helped more than 834,000 households in 2022 through the Equitable Housing Finance Plans.

Updates to the Enterprises’ 2022–2024 plans include, but are not limited to:

  • Inclusion of the Latino Housing Journey and actions to remove barriers experienced by Latino renters and homeowners in Fannie Mae’s plan.
  • Ensuring existing borrowers receive fair loss mitigation support and outcomes through monitoring and developing strategies to close any gaps.
  • A provision of financial capabilities coaching to build credit and savings.
  • Support for locally owned modular construction facilities in communities of color.
  • Increasing the reach of Enterprise Special Purpose Credit Programs to support homeownership attainment and housing sustainability in underserved communities.

  • A virtual roundtable was held by the Treasury Department to discuss the impact of the American Rescue Plan’s Emergency Rental Assistance (ERA) program on Asian American, Native Hawaiian, and Pacific Islander (AANHPI) renters and communities. The program has made nearly 10.8 million household payments and reallocated more than $4.8 billion in resources. Tenants also shared their experiences and discussed ways to reduce barriers to affordable housing services.
  • The Treasury’s ERA program, part of the American Rescue Plan Act, is a federal effort designed to offer monetary support to qualified households facing difficulties in covering their rent or utility payments because of the COVID-19 pandemic. The ERA program supported housing stability during COVID-19, with most funds going to low-income, historically underserved renters of color. More than 85% of beneficiaries are very low-income families, and funds have reached a diverse range of households. Altogether, the ERA program has made $46.55 billion available to promote housing stability. Further, the Treasury Department implemented a reallocation approach to expedite support for renters, redirecting unused funds to grantees with demonstrated need, as well as to robust programs, maximizing available resources.

The Enterprise Duty to Serve Underserved Markets regulation has been amended by the FHFA through a recently announced final rule. This rule enables the Enterprises to receive Duty to Serve credit for their endeavors in all colonia census tracts (defined as a high-needs rural region).

The goal of these modifications is to streamline the Enterprises’ capacity to effectively carry out their Duty to Serve initiatives within colonia census tracts. This, in turn, will contribute to enhancing financial resources and support in these underserved communities, fostering increased liquidity.

The University of California Investment Office (UC Investments) hosted a roundtable discussion with Deputy Secretary of the Treasury Wally Adeyemo, Counselor for Racial Equity Janis Bowdler, and Emergency Capital Investment Program (ECIP) recipients.

The participants discussed how ECIP-supported CDFIs and minority depository institutions (MDIs) in California are delivering financial products and services to expand economic potential in all communities—including immigrants, concentrated populations of low-income families, rural areas, and those with limited English or who prefer to do financial business in their first language.

ECIP recipients also discussed the importance of receiving deposits to support their lending in these communities. These additional deposits will build on the Economic Opportunity Coalition’s announced deposits of $1 billion for ECIP recipients.

Take a look back at previous digests

May 2023

The chasm of financial inequities disproportionately impacting historically marginalized communities cannot be ignored and, in many ways, has grown throughout the global pandemic. With the threat of a recession looming closer, many working families are struggling to make ends meet as they’re saddled with high interest rates and inflation at every turn.

Read more

March 2023

While financial inclusion efforts have increased significantly over recent years, regulators continue to take critical steps to implement a more equitable and resilient financial sector and correct discrimination, increase access to financial services, and promote equality with consumer protection. In this issue, we noted several aspects of the ongoing wave of regulatory initiatives to address potential inequities.

Read more

December 2022

As the financial services industry faces a pivotal point in its evolution, policymakers are encouraging the industry in cultivating a better world with policies that aim to make things easier for the financially underserved. In this issue, we bring forward the latest developments taking place in the industry regarding how discrimination is being brought under the spotlight with the reintroduction of bills and other notable regulatory advances.

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August 2022

With the realization that universal progress hinges on the inclusion of socioeconomically disadvantaged segments, there’s growing interest in the “social” factor when measuring the environmental, social, and governance sustainability and ethical impact. This issue presents the latest developments taking place in banking and capital markets, insurance, investment management, and commercial real estate.

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Corporate social responsibility and financial inclusion

Financial inclusion is a critical consideration in defining an organization’s corporate social purpose. As a more human-centric economy rapidly takes shape, financial services organizations must heed the call to engage with a broader array of customer, employee, and community stakeholders in more direct, personalized, meaningful, and socially responsible ways. Learn how we can help your organization lead the way, with financial inclusion efforts that create a higher bottom line for all.

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