Balancing the Scales: Embracing Technological Innovation for Fairer Lending Practices

5 min readDec 20, 2023

Inequality in Mortgage Lending

As CEO of Allison, supporting local and small banks, I was stunned by the CNN Business report on racial disparities in mortgage lending. It’s not just about numbers; it’s about fair access to financial opportunities, crucial for security and stability, especially for minority groups like Black Americans. This issue demands action.

In this exploration, we’ll dig into the deep roots of these systemic disparities, their present-day impact, and the vital roles of Black-owned banks and innovative technologies in tackling these challenges. We’re not just outlining problems; we’re actively seeking solutions and pathways to a fairer financial world.

At Allison, our drive for change is more than corporate responsibility. It’s our commitment to ensuring every American has fair financial access. Join us as we unravel the complexities of this issue and share our steps toward a more equitable financial landscape.

Historical Context

The story of mortgage lending in the U.S. is deeply scarred by past injustices like redlining and housing segregation. Picture the 1930s: minority neighborhoods encircled with red lines on maps, marking them high-risk and cutting them off from vital mortgage loans and investments. This was part of a broader systemic racism, affecting jobs, education, and public services.

Key examples include:

  • Levittown, New York: Post-WWII suburb designed for affordable housing, yet explicitly barred Black families.
  • Chicago’s Contract Buying: African American homebuyers were sold houses at inflated prices, leading to financial losses.
  • Oakland, California: Redlining policies significantly limited the development of minority neighborhoods.

These examples highlight how neighborhoods were split along racial lines, limiting wealth-building opportunities for minority communities and contributing to the present racial wealth gap. Understanding this history is vital. It goes beyond acknowledging past wrongs; it’s about learning from them to ensure our current financial practices are fair and equitable. Reflecting on these practices, we are reminded of the importance of vigilance and proactive measures to prevent such discrimination today.

Navy Federal Credit Union as a Case Study

The 2022 data from Navy Federal Credit Union sheds light on a crucial aspect of the mortgage lending industry: the disparities in approval rates. This situation, particularly affecting Black applicants, is a window into the complex dynamics of mortgage lending. It’s important to note that this isn’t about assigning blame to Navy Federal, but rather about understanding a larger pattern that exists across the industry.

Key Considerations:

  • Evaluation Practices: Exploring how loan applications are assessed can provide insights into systemic trends, without singling out Navy Federal.
  • Broader Industry Patterns: Recognizing that these trends are not unique to any single institution but reflect wider industry practices.

The implications are significant:

  • Economic Consequences: Disparities in mortgage approvals have real-world impacts on wealth building and financial stability for minority communities.
  • Need for Industry-Wide Change: This scenario underscores the importance of industry-wide introspection and reform for more equitable lending practices.

At Allison, we view this as an opportunity to lead by example in promoting fair and equitable lending practices. This case study serves as a catalyst for broader discussions and actions towards a more inclusive financial system, ensuring fairness for all applicants.

Importance of Black-Owned Banks

Black-owned banks in America are crucial pillars in the financial sector, offering more than just banking services; they represent hope and empowerment. Deeply rooted in communities, they actively address systemic inequities in banking and lending, particularly in areas neglected by mainstream banking.

Arlo Washington, CEO of People Trust Federal Credit Union; A Black-owned financial institution in Little Rock, Arkansas.

Arlo Washington, CEO of People Trust Community Federal Credit Union in Little Rock, Arkansas, brings this point home: “This comes by no surprise. Unfortunately, when it comes to the wealth gap, this has been the narrative for African Americans in America. Not being given a fair chance to build or create wealth, even when all the qualifications are met. […] If we want a more inclusive economy and to close the wealth gap in our country, we must include everybody in it.” Read more about Arlo’s story here.

These institutions are more than transactional entities; they’re pivotal in community growth, offering fair loans, and nurturing financial literacy and independence. By understanding and meeting the unique needs of their customers, they fill a gap left by traditional financial institutions.

Moreover, Black-owned banks are at the vanguard of advocating for policy changes to combat racial discrimination in lending. They have been instrumental in promoting legislation and policies for a more inclusive financial system.

In a world where financial equality remains a goal, these banks are more than symbols of resilience and progress, they are progress. They challenge the status quo and pave the way toward a more equitable financial future, embodying the spirit of inclusion and equity.

Advancements in Banking Technology by Black Entrepreneurs

In the dynamic world of banking technology, significant strides are being made towards equitable financial services. Leading this charge are innovative fintech companies, including those spearheaded by Black and minority entrepreneurs, leveraging technologies to ensure fairness in lending.

At Allison, we align with this vision through our AI-driven platform, designed for efficient bank management. This technology, enabling banks to manage deposits and customer operations via a single dashboard, is part of a larger ecosystem fostering financial inclusivity.

Noteworthy advancements in the sector, aiding in combating implicit racial bias, include:

  • Mobile Banking Apps: Facilitating banking access in traditionally underserved communities, reducing geographic and economic barriers.
  • Blockchain-Based Platforms: Ensuring transaction transparency and security, minimizing the risk of discriminatory practices.
  • Alternative Data in Credit Scoring: Using non-traditional data for credit assessments, offering a more holistic view of a person’s financial health.
  • Peer-to-Peer Lending Platforms: Providing diverse capital sources, bypassing traditional biases of institutional lending.

As we embrace the potential of technology in reshaping banking, it’s vital to recognize that human bias, often implicit and unintentional, can influence financial decisions. Collaborating with more Black and minority-led technology providers offers a path forward, infusing diverse perspectives that help mitigate these biases. This approach not only enriches the technological landscape but also fosters a more balanced and fair financial ecosystem.

Moving Towards a Fairer Future in Lending

As we move towards a future of financial fairness, the role of innovative Black-owned and minority-owned financial institutions and fintech firms becomes increasingly significant. Our collective commitment to equitable lending practices is a call to action for others to join this transformative journey.

By working together, we strive to create a financial ecosystem that is not only technologically sophisticated but also fundamentally just, inching closer to a reality where financial fairness is a tangible experience for everyone.





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