It turns out that Quontic operated like a Community Development Financial Institution before I even knew what one was.
It all began shortly after we acquired the bank in 2009 and made the decision to move it to New York City—where I lived, where my former company was, and where my circle of influence really existed. But the bank was too small to move to Manhattan, so we did the next best thing and moved it to Astoria, Queens—right across the East River from the Upper East Side of Manhattan.
If you don’t know much about Astoria, it happens to be one of the most ethnically diverse neighborhoods in the country. Naturally, we began to hire people that were local to the community. Many of the people we hired, and continue to hire, were immigrants, mostly bilingual, and we ended up with employees from 20+ different countries. In fact, an excess of two-thirds of our employees are either Asian-American, Bangladeshi, Greek-American, Hispanic, or African-American. The nature of the staff reflects the community in which we operate.
By virtue of having such a diverse staff, we attracted diverse customers, especially on the mortgage-lending side. We were making a lot of loans to immigrants, many of whom were small business owners and gig economy workers. In the Asian-American community in the area, in particular, you have a lot of families that are both small business owners and also low income. By virtue of cultural nuance, a lot of them were pooling resources to acquire real estate. We tailored our lending products to adapt to the community that we were operating in. In doing so, it shaped the bank—how we looked at our customers, how we served them, and even our recruiting efforts; the more deeply we immersed ourselves in these markets, the more people we had to hire that spoke the languages of the people that live here. It wasn’t long before we found that the majority of the loans we were making were to low income families, or in low-income census tracts around the city.
At the same time as we were building our business, I was also building my personal network of other community bank CEOs. As I was discussing our niche lending strategies with another CEO whose bank is located in the Bronx, I first learned that our yet-to-be articulated mission to help low income families was not unique. I also learned that there was in fact an organization of like-minded financial institutions whose primary mission is to help the underserved – the CDFI Fund, a division of the United States Department of Treasury.
CDFIs play an important role in generating economic growth and opportunity in some of our nation’s most distressed communities.
CDFIs are mission-driven financial institutions that take a market-based approach to supporting economically disadvantaged communities. These mission-driven organizations are encouraged to apply for CDFI certification and participate in CDFI Fund programs that inject new sources of capital into neighborhoods that lack access to financing.
Essentially, Quontic was behaving as a CDFI without actually being a CDFI. It made natural sense for us to take the next step and apply for the formal designation. We were approved, of course, and once we became a CDFI, what we were already doing really evolved into our mission—to serve the underbanked.
Many of our customers have already heard “no” from other banks when they come to us. Most often, this is because of the Ability to Repay (ATR) standard created in the Dodd-Frank legislation. Under the ATR standard, borrowers have to provide income documentation, like tax returns, W-2’s and pay stubs, and then the lender has to do an analysis of those income documents and calculate their debt to income ratio. The CDFI designation is for lenders that have experience lending in these low-income communities and exempts them from the ATR regulation—so we (Quontic) don’t have to collect tax returns, pay stubs, W-2’s or calculate a debt to income ratio. Instead, we can look at the totality of the borrower’s circumstances and make an informed decision as to whether or not we think this is a good credit risk and whether or not the borrower will be able to repay the mortgage.
Take one of our customers, Ming Lin, for example. She purchased an investment home in the Bronx. When the property required repairs, she was declined by 3 other lenders before one of our Loan Officers was able to utilize our Portfolio Loan product to secure financing for her. Or Ya Jing Lin, who was relocating from her multifamily home in College Point, NY to a single family in Bayside NY, and used our Community Development Loan after being turned down elsewhere. She closed on time and was able to move into her new home. Or Jenny Li, a young woman shopping for over a year for an investment property, and when she found one and used our CDL to make that dream a reality.
We do some other things in those low-income communities, too. We sponsor a lot of first-time homeownership counseling seminars. We partner with some of the NHS’s neighborhood housing services organizations, nonprofits that also exist to try to foster homeownership in low-income areas. We make a significant number of charitable contributions to organizations with missions consistent with our own. And we’re proud to be a CDFI.
This is an important program because it’s been proven over time that homeownership adds to household stability; There is less illness and higher rates of high school graduation for children who live in homes that are owned rather than rented. There is all kinds of data to support why homeownership is great for families and communities. In addition to the fact that the lending we’re doing is serving a public good, it’s also profitable to us—of course, we’re a regulated bank. Regardless of our mission and our exemption of having to collect income documentation, the OCC regulators obviously need to see the loans we’re funding are safe and will be repaid. We’ve proven over time that our strategy works.
And for the past 11 years, it’s worked well for us and the families who rely on us for mortgage loans. And, here’s the thing—we’ve never suffered a loss on a single residential mortgage loan made to any borrower, whether or not we collected income documentation the traditional way.
And now, as we expand beyond New York City and grow our lending footprint nationally, we’ve designed products that are created to serve the underbanked. We’re the bank that’s here to help.