Freedom at Last From Discriminatory Lending: A Fairer Future With Technology Growing up in Levittown, Pennsylvania, a famously once-segregated community, with a black stepfather meant that from an early age, I understood one thing for certain: racism was still alive and well. Now as CEO of an online lending startup, I see that one behemoth industry has been at the epicenter of this massive scale of discrimination for its entire existence. Mortgage lending has caused injustice to minorities from its beginning and the answer to creating greater access to equality may lie in technology.
In the middle-class Philadelphia suburb of my childhood, every house was the same, in fact they were absolutely intended to be and appear identical, a testament to its developer, William Levitt, being credited with the title of "The Henry Ford of Housing." But the residents were anything but identical -- a veritable broadest-range gene pool made up of third and fourth-generation immigrant families. Germans, Irish, Turks, Dutch, Italians. People of every stripe called this their home, but these varieties were only varying by a shade or two of whiteness.
Our family was decidedly different. When my mother remarried in 1989, it was to a wonderful man I was lucky to call my stepfather. He also happened to be black. He raised my younger brother and me as his own children. My mom and stepdad gave birth to my third brother while living in Levittown, so we were a mixed-race family, a fact not lost on the history of our now-integrated, but still unhealed town.
In 1952, just thirty seven years before my family lived there, the first homes in William Levitt's suburbia were sold and applications for homeownership were made in person at the Levittown Exhibit Center Sales Office. The Chairman of Levitt & Sons "did not consider himself to hold racist ideals," yet he long refused to sell homes to African Americans, allowing discrimination in the newly-developed housing community to continue and perpetuating the practices and policies of red-lining common in urban centers. And he justified this blatant racism as being nothing more than a byproduct of the era, stating that he "knew that if we sold one house to a Negro family, then 90 or 95 percent of our white customers will not buy into the community." While Levitt structured mass suburbia for the first time, he certainly was not the first or the last to structure a historic, systematic approach that excluded black people from reasonable housing options.
This attitude was not isolated and certainly permeated the nation. It's curious to consider the context of history. When Levitt was breaking ground on his mega-development, Jackie Robinson was breaking the color barrier in baseball and the following year, President Harry S. Truman integrated the military. Levitt's neighborhood, innovative as it was, was simultaneously behind the times from the moment of its inception, to say the least, and this brought certain controversy just five years later.
Imagine the community in 1957. Mobs of angry, white protestors are held back by State Police at 43 Deepgreen Lane, in the Dogwood Hollow section of Levittown, PA. There's been two steady weeks of rioting. Windows are smashed. The national anthem rings out from voices of the "most patriotic" neighbors. Home deliveries of milk, oil, and bread halt. Threats of being "shot down on sight," swirl through the families' telephones. Later, anti-segregationists purchase the property next door and fly the confederate flag, furthering their intimidation tactics. But Daisy Myers and her family stay, one of the first to take on Levittown's segregation rules, weathering this ordeal with "dignity, courage, grace, and fortitude." This earns her the well-deserved title of the "Rosa Parks of the North."
It is predictable, now reviewing the historical facts, that the effects of segregation are still seen in Levittown today, as the 2010 census identified ninety-eight percent of the town's population as Caucasian. Racist policies here and in most of the country have not abated - they've simply evolved, and they reveal themselves oftentimes too late.
As a case in point, my parents just received a check for $235 in the mail for discriminatory action against them during their last refinance. Between 2005 and 2008, National City Bank "engaged in a pattern or practice of discrimination on the basis of race and national origin in residential mortgage lending in violation of the Equal Credit Opportunity Act and the Fair Housing Act policies and practices," according to the U.S. Department of Justice. The settlement states that "African-American and Hispanic borrowers paid higher prices for their home mortgage loans than non-Hispanic White borrowers, not based on creditworthiness or other objective criteria related to borrower risk, but because of their race or national origin." Approximately 76,000 African-American and Hispanic residential mortgage borrowers were affected. In order to fully grasp the impact of this amount, one needs to consider the compounded impact of that kind of practice -- dollar by dollar, the accrual over time of the unfair and uneven practices.
It's obvious, then, to see why the myth of post-racial America is so deeply offensive and how our current mortgage industry is perpetuating this lie. For example, when buying or refinancing a home, a borrower must sign a minimum of 28 pages of disclosures, with variances depending on his or her state, the loan and property types, as well as lender-specific requirements.
Reading through the legalese of these 28-plus pages, one will see many passages that speak directly or indirectly to discriminatory practices. In fact, only 10 of these pages actually are needed to process the loan. The rest, of course, exist to protect the proverbial asses of the banks whose faulty policies led to their very creation. On close inspection, one will see that these documents say what should already be apparent -- that you will not be discriminated against upon your race, religion, sex and sexual orientation. This is no less a byproduct of reactionary regulations via added paperwork and is akin to treating the symptom instead of the cause. It's ludicrous that an additional 18 pages of documentation must be dedicated to telling borrowers about basic human rights, all in the name of compliance -- especially when it's evident that unfair lending practices are still prevalent.
What's more, in a survey completed at the 2014 Mortgage Bankers Association annual convention, over 80 percent of bankers that responded suggested that their cost to manage compliance will rise in 2015. That means higher fees and likely more paperwork are on the way. To believe that these reactionary policies and the documents that represent them can fix the human element at play is shortsighted.
The truth is that homeownership is one of the primary tools for accumulating wealth. It is a critical step in gaining access to desirable communities in which one can enjoy ample public services, including public schools. In a related issue, one could look long and hard at our funding for public education as derived from real estate property taxes -- the intersectionality here is potent. For a long time, homeownership was a luxury enjoyed by only a small portion of the population. Due to the enormous costs associated with this, only 30 percent of Americans owned their homes in 1930. This all changed in 1934 when Congress created the Federal Housing Administration. This insured private mortgages, allowing interest rates to fall and buyers to make smaller down payments.
Theoretically, this should have opened the door for all people to embrace the dream of owning a home. However, in implementing the new law, the FHA adopted a map system that rated neighborhoods according to their apparent stability. In hindsight, what stability meant was race. Neighborhoods without minorities were awarded "A" or "on demand" scores, while immigrant and minority neighborhoods routinely were graded "D." The practical effect of this was that minorities were unable to secure financing to purchase houses in their neighborhoods.
This practice known as "redlining" meant that for decades minorities struggled to purchase homes, usually against an unseen, unnamed opponent, the lending institutions themselves. In 1968, the Fair Housing Act outlawed this overtly racist lending behavior, but it continued nearly unabated for years. Finally, in 1975, Congress gave teeth to the law: the Mortgage Disclosure Act required financial institutions to collect and report data regarding their lending practices to the Federal Financial Institutions Examination Council. Banks had to submit information about exactly who applied for financing and what decisions were made.
While this was arguably one of the most important steps in curtailing discriminatory lending practices, it would be decades before anyone made heads or tails of the data as it required long-term examinations of the systemic practices of the institutions over the course of hundreds of applications. In over 20 studies conducted between 1980 and 1991, with all other factors being equal, researchers found a negative correlation between the racial composition of an area and the lending decision, meaning if you were a minority, you were less likely to be approved for a loan. So much for outlawing racial lending behavior.
With the data behind them, the Department of Justice finally stepped in to put a stop to discriminatory lending practices. In a landmark case, U.S. v. Decatur Federal Savings and Loan Association (1996), the DOJ charged Decatur with a pattern of racial discrimination in lending. Among its charges, the DOJ specifically alleged that the bank marketed its loans primarily to white customers, failed to offer desirable loan products to black customers, and, most damning, denied financing to black applicants with identical qualifications as white applicants. In response to the suit, Decatur agreed to take remedial measures to address its racial profiling and pay $1 million in reparations. A slap on the wrist, as they say. And what's more, these payments did not compensate for accrued wealth that comes with equity and tax benefits of homeownership, widening the wealth gap further.
This should have been the end of it. However, the next decade ushered in some of the ugliest discriminatory practices to date. Instead of barring People of Color from securing financing, lending institutions, in a complete role-reversal, began to seek out these applicants. In a process known as reverse-redlining, banks targeted minorities for mortgage applications, specifically steering them toward subprime mortgages with high interest rates and unfavorable terms.
This predatory lending was not limited to minorities with low credit scores. In fact, even when minority applicants had good credit, they were pushed to subprime loans. A 2009 study by the New York Times showed that black households in New York City with an income of $68,000 or more were nearly five times more likely to hold subprime mortgages than white households with similar or even lower incomes. Black applicants who qualified for prime mortgages were 2.9 more likely to be talked into a subprime loan and Hispanic borrowers were 1.8 times more likely. Is this because these groups are more receptive? Easier to sell? Not likely. But what does remain an indisputable fact, is that subprime loans paid more commission to the loan officers on the other end of the telephone. A moral hazard was at the epicenter of the problem.
At institutions, such as National City Bank, financial incentives were created to compensate loan officers who charged "overages," or additional fees above the par rate. This par rate is the price of a mortgage loan, which is calculated entirely on criteria related to loan risk and is usually set forth on a rate sheet. Industry wide, it was not uncommon for employees to be awarded higher commissions or bonuses for coaxing borrowers to accept subprime loans when they would have otherwise qualified for prime loans.
Internal memos and affidavits later revealed that bank employees referred to subprime applicants as "mud people" and their financing as "ghetto loans." In 2006, 52 percent of loans to blacks and 40 percent of loans to Hispanics were subprime. This is a quintessential example of institutionalized, systemic, race-based crime that is profit-driven and continues in the twenty-first century.
Ultimately, these financial institutions were held accountable for their discriminatory lending. The Consumer Financial Protection Bureau and the United States Department of Justice have entered into a settlement with the aforementioned National City Bank, which established a $35 million fund to pay African-American and Hispanic borrowers identified by the government agencies as having overpaid. Wells Fargo has ponied up $175 million to settle a suit for lending discrimination and Bank of America has paid $335 million to resolve a similar suit.
These numbers, staggering as they are, do not actually represent a fair or accurate compensation. The damage was done. Borrowers with subprime mortgages defaulted at historic rates and many lost their homes to foreclosure. And due to the predatory lending practices of large banks, minorities were hit hardest.
A study done by the Center for Responsible Lending found disparate foreclosure rates between white, black and Hispanic communities. According to the study, 4.5 percent of white homeowners foreclosed on their homes compared to 7.9 percent of Hispanic homeowners and 7.7 percent of black homeowners during the mortgage crisis. What's interesting is that the study showed that high-income black borrowers were 80 percent more likely, and Latinos 90 percent more likely, to lose their homes to foreclosure than their white counterparts, pointing to disproportionate numbers of minority borrowers who were directed into subprime loans.
The effects of the subprime mortgage crisis will be felt for a long time by the United States. However, for minorities, it served as just another black eye in the pursuit of owning a home. Since 1940, the gap in homeownership between whites and minorities has been at least 20 percent. Today, it's even larger. Almost 73 percent of whites own their home compared to only 42.9 percent of blacks and 45.6 percent of Hispanics. For minorities, the ability to take that simple step toward financial independence and wealth accumulation remains as elusive as it was in 1930.
Finally, this practice is changing. And not too surprisingly, it's not the banks, the perpetrators of mass-discrimination and historically misleading practices that are leading the charge. In fact, it's a handful of technology companies from Silicon Valley. You see, to take a step in the right direction, we need to remove race from the equation, not regulate it with checkboxes and reactionary policies. The practice of applying for a loan online may level the playing field and be less worrisome for People of Color, but there are still challenges and ultimately, it's still mostly white people making the underwriting decisions.
Changing the way one applies for a loan doesn't simply mean stating for 28 pages that a borrower will not be discriminated against, or that we should depend solely on federal and state regulations to curb financial intuitions' racist lending practices. Decades of systemic discrimination have proven that model unsuccessful. However, by allowing all people to apply for loans behind the safety of a computer screen, the benefits are tremendous.
Imagine a homeowner looking to refinance their home. They open their computer and visit a website that shops all available rates in three seconds. The site only delivers the best rates for their scenario and is not incentivized by selling overages. The borrower then fills out the application, and their credit is pulled to verify their identity. They e-sign some processing disclosures, and login to bank accounts to provide income and asset verification. This entire scenario takes only 30 minutes of the borrower's time.
On the other side of that transaction sits an underwriter who has not seen a single checkbox for race, ethnicity, religion, gender, or sexual orientation. The loan is approved and the homeowner instantly receives a congratulatory email or text message. But the benefits of that scenario lie deeper than this good news.
In this situation, the need for non-process related disclosures goes to nil. Consequently, operational costs plummet and consumers save personal time, amounting to lower rates and fees paid for the loan.
Additionally, this aforementioned process is convenient for everyone. No matter the borrower's proximity to the local bank or their availability during typical banking hours, all resources are accessible virtually, 24/7.
Lastly and most importantly, borrowers can finally be assessed fairly, not by the color of their skin, their sexual orientation, their religion, or their gender, but solely on the content of their application.
Equality, at least in terms of lending, may be closer than we think.
Jason van den Brand is founder and CEO of Lenda, the first platform that helps home owners get a refinance online from start to finish. Based in San Francisco, Lenda graduated 500 Startups in summer 2014 and secured funding from prominent VC's including Tom Fallows of Google Shopping Express, Structure Capital, Winklevoss Capital and China Growth Capital.
In the middle-class Philadelphia suburb of my childhood, every house was the same, in fact they were absolutely intended to be and appear identical, a testament to its developer, William Levitt, being credited with the title of "The Henry Ford of Housing." But the residents were anything but identical -- a veritable broadest-range gene pool made up of third and fourth-generation immigrant families. Germans, Irish, Turks, Dutch, Italians. People of every stripe called this their home, but these varieties were only varying by a shade or two of whiteness.
Our family was decidedly different. When my mother remarried in 1989, it was to a wonderful man I was lucky to call my stepfather. He also happened to be black. He raised my younger brother and me as his own children. My mom and stepdad gave birth to my third brother while living in Levittown, so we were a mixed-race family, a fact not lost on the history of our now-integrated, but still unhealed town.
In 1952, just thirty seven years before my family lived there, the first homes in William Levitt's suburbia were sold and applications for homeownership were made in person at the Levittown Exhibit Center Sales Office. The Chairman of Levitt & Sons "did not consider himself to hold racist ideals," yet he long refused to sell homes to African Americans, allowing discrimination in the newly-developed housing community to continue and perpetuating the practices and policies of red-lining common in urban centers. And he justified this blatant racism as being nothing more than a byproduct of the era, stating that he "knew that if we sold one house to a Negro family, then 90 or 95 percent of our white customers will not buy into the community." While Levitt structured mass suburbia for the first time, he certainly was not the first or the last to structure a historic, systematic approach that excluded black people from reasonable housing options.
This attitude was not isolated and certainly permeated the nation. It's curious to consider the context of history. When Levitt was breaking ground on his mega-development, Jackie Robinson was breaking the color barrier in baseball and the following year, President Harry S. Truman integrated the military. Levitt's neighborhood, innovative as it was, was simultaneously behind the times from the moment of its inception, to say the least, and this brought certain controversy just five years later.
Imagine the community in 1957. Mobs of angry, white protestors are held back by State Police at 43 Deepgreen Lane, in the Dogwood Hollow section of Levittown, PA. There's been two steady weeks of rioting. Windows are smashed. The national anthem rings out from voices of the "most patriotic" neighbors. Home deliveries of milk, oil, and bread halt. Threats of being "shot down on sight," swirl through the families' telephones. Later, anti-segregationists purchase the property next door and fly the confederate flag, furthering their intimidation tactics. But Daisy Myers and her family stay, one of the first to take on Levittown's segregation rules, weathering this ordeal with "dignity, courage, grace, and fortitude." This earns her the well-deserved title of the "Rosa Parks of the North."
It is predictable, now reviewing the historical facts, that the effects of segregation are still seen in Levittown today, as the 2010 census identified ninety-eight percent of the town's population as Caucasian. Racist policies here and in most of the country have not abated - they've simply evolved, and they reveal themselves oftentimes too late.
As a case in point, my parents just received a check for $235 in the mail for discriminatory action against them during their last refinance. Between 2005 and 2008, National City Bank "engaged in a pattern or practice of discrimination on the basis of race and national origin in residential mortgage lending in violation of the Equal Credit Opportunity Act and the Fair Housing Act policies and practices," according to the U.S. Department of Justice. The settlement states that "African-American and Hispanic borrowers paid higher prices for their home mortgage loans than non-Hispanic White borrowers, not based on creditworthiness or other objective criteria related to borrower risk, but because of their race or national origin." Approximately 76,000 African-American and Hispanic residential mortgage borrowers were affected. In order to fully grasp the impact of this amount, one needs to consider the compounded impact of that kind of practice -- dollar by dollar, the accrual over time of the unfair and uneven practices.
It's obvious, then, to see why the myth of post-racial America is so deeply offensive and how our current mortgage industry is perpetuating this lie. For example, when buying or refinancing a home, a borrower must sign a minimum of 28 pages of disclosures, with variances depending on his or her state, the loan and property types, as well as lender-specific requirements.
Reading through the legalese of these 28-plus pages, one will see many passages that speak directly or indirectly to discriminatory practices. In fact, only 10 of these pages actually are needed to process the loan. The rest, of course, exist to protect the proverbial asses of the banks whose faulty policies led to their very creation. On close inspection, one will see that these documents say what should already be apparent -- that you will not be discriminated against upon your race, religion, sex and sexual orientation. This is no less a byproduct of reactionary regulations via added paperwork and is akin to treating the symptom instead of the cause. It's ludicrous that an additional 18 pages of documentation must be dedicated to telling borrowers about basic human rights, all in the name of compliance -- especially when it's evident that unfair lending practices are still prevalent.
What's more, in a survey completed at the 2014 Mortgage Bankers Association annual convention, over 80 percent of bankers that responded suggested that their cost to manage compliance will rise in 2015. That means higher fees and likely more paperwork are on the way. To believe that these reactionary policies and the documents that represent them can fix the human element at play is shortsighted.
The truth is that homeownership is one of the primary tools for accumulating wealth. It is a critical step in gaining access to desirable communities in which one can enjoy ample public services, including public schools. In a related issue, one could look long and hard at our funding for public education as derived from real estate property taxes -- the intersectionality here is potent. For a long time, homeownership was a luxury enjoyed by only a small portion of the population. Due to the enormous costs associated with this, only 30 percent of Americans owned their homes in 1930. This all changed in 1934 when Congress created the Federal Housing Administration. This insured private mortgages, allowing interest rates to fall and buyers to make smaller down payments.
Theoretically, this should have opened the door for all people to embrace the dream of owning a home. However, in implementing the new law, the FHA adopted a map system that rated neighborhoods according to their apparent stability. In hindsight, what stability meant was race. Neighborhoods without minorities were awarded "A" or "on demand" scores, while immigrant and minority neighborhoods routinely were graded "D." The practical effect of this was that minorities were unable to secure financing to purchase houses in their neighborhoods.
This practice known as "redlining" meant that for decades minorities struggled to purchase homes, usually against an unseen, unnamed opponent, the lending institutions themselves. In 1968, the Fair Housing Act outlawed this overtly racist lending behavior, but it continued nearly unabated for years. Finally, in 1975, Congress gave teeth to the law: the Mortgage Disclosure Act required financial institutions to collect and report data regarding their lending practices to the Federal Financial Institutions Examination Council. Banks had to submit information about exactly who applied for financing and what decisions were made.
While this was arguably one of the most important steps in curtailing discriminatory lending practices, it would be decades before anyone made heads or tails of the data as it required long-term examinations of the systemic practices of the institutions over the course of hundreds of applications. In over 20 studies conducted between 1980 and 1991, with all other factors being equal, researchers found a negative correlation between the racial composition of an area and the lending decision, meaning if you were a minority, you were less likely to be approved for a loan. So much for outlawing racial lending behavior.
With the data behind them, the Department of Justice finally stepped in to put a stop to discriminatory lending practices. In a landmark case, U.S. v. Decatur Federal Savings and Loan Association (1996), the DOJ charged Decatur with a pattern of racial discrimination in lending. Among its charges, the DOJ specifically alleged that the bank marketed its loans primarily to white customers, failed to offer desirable loan products to black customers, and, most damning, denied financing to black applicants with identical qualifications as white applicants. In response to the suit, Decatur agreed to take remedial measures to address its racial profiling and pay $1 million in reparations. A slap on the wrist, as they say. And what's more, these payments did not compensate for accrued wealth that comes with equity and tax benefits of homeownership, widening the wealth gap further.
This should have been the end of it. However, the next decade ushered in some of the ugliest discriminatory practices to date. Instead of barring People of Color from securing financing, lending institutions, in a complete role-reversal, began to seek out these applicants. In a process known as reverse-redlining, banks targeted minorities for mortgage applications, specifically steering them toward subprime mortgages with high interest rates and unfavorable terms.
This predatory lending was not limited to minorities with low credit scores. In fact, even when minority applicants had good credit, they were pushed to subprime loans. A 2009 study by the New York Times showed that black households in New York City with an income of $68,000 or more were nearly five times more likely to hold subprime mortgages than white households with similar or even lower incomes. Black applicants who qualified for prime mortgages were 2.9 more likely to be talked into a subprime loan and Hispanic borrowers were 1.8 times more likely. Is this because these groups are more receptive? Easier to sell? Not likely. But what does remain an indisputable fact, is that subprime loans paid more commission to the loan officers on the other end of the telephone. A moral hazard was at the epicenter of the problem.
At institutions, such as National City Bank, financial incentives were created to compensate loan officers who charged "overages," or additional fees above the par rate. This par rate is the price of a mortgage loan, which is calculated entirely on criteria related to loan risk and is usually set forth on a rate sheet. Industry wide, it was not uncommon for employees to be awarded higher commissions or bonuses for coaxing borrowers to accept subprime loans when they would have otherwise qualified for prime loans.
Internal memos and affidavits later revealed that bank employees referred to subprime applicants as "mud people" and their financing as "ghetto loans." In 2006, 52 percent of loans to blacks and 40 percent of loans to Hispanics were subprime. This is a quintessential example of institutionalized, systemic, race-based crime that is profit-driven and continues in the twenty-first century.
Ultimately, these financial institutions were held accountable for their discriminatory lending. The Consumer Financial Protection Bureau and the United States Department of Justice have entered into a settlement with the aforementioned National City Bank, which established a $35 million fund to pay African-American and Hispanic borrowers identified by the government agencies as having overpaid. Wells Fargo has ponied up $175 million to settle a suit for lending discrimination and Bank of America has paid $335 million to resolve a similar suit.
These numbers, staggering as they are, do not actually represent a fair or accurate compensation. The damage was done. Borrowers with subprime mortgages defaulted at historic rates and many lost their homes to foreclosure. And due to the predatory lending practices of large banks, minorities were hit hardest.
A study done by the Center for Responsible Lending found disparate foreclosure rates between white, black and Hispanic communities. According to the study, 4.5 percent of white homeowners foreclosed on their homes compared to 7.9 percent of Hispanic homeowners and 7.7 percent of black homeowners during the mortgage crisis. What's interesting is that the study showed that high-income black borrowers were 80 percent more likely, and Latinos 90 percent more likely, to lose their homes to foreclosure than their white counterparts, pointing to disproportionate numbers of minority borrowers who were directed into subprime loans.
The effects of the subprime mortgage crisis will be felt for a long time by the United States. However, for minorities, it served as just another black eye in the pursuit of owning a home. Since 1940, the gap in homeownership between whites and minorities has been at least 20 percent. Today, it's even larger. Almost 73 percent of whites own their home compared to only 42.9 percent of blacks and 45.6 percent of Hispanics. For minorities, the ability to take that simple step toward financial independence and wealth accumulation remains as elusive as it was in 1930.
Finally, this practice is changing. And not too surprisingly, it's not the banks, the perpetrators of mass-discrimination and historically misleading practices that are leading the charge. In fact, it's a handful of technology companies from Silicon Valley. You see, to take a step in the right direction, we need to remove race from the equation, not regulate it with checkboxes and reactionary policies. The practice of applying for a loan online may level the playing field and be less worrisome for People of Color, but there are still challenges and ultimately, it's still mostly white people making the underwriting decisions.
Changing the way one applies for a loan doesn't simply mean stating for 28 pages that a borrower will not be discriminated against, or that we should depend solely on federal and state regulations to curb financial intuitions' racist lending practices. Decades of systemic discrimination have proven that model unsuccessful. However, by allowing all people to apply for loans behind the safety of a computer screen, the benefits are tremendous.
Imagine a homeowner looking to refinance their home. They open their computer and visit a website that shops all available rates in three seconds. The site only delivers the best rates for their scenario and is not incentivized by selling overages. The borrower then fills out the application, and their credit is pulled to verify their identity. They e-sign some processing disclosures, and login to bank accounts to provide income and asset verification. This entire scenario takes only 30 minutes of the borrower's time.
On the other side of that transaction sits an underwriter who has not seen a single checkbox for race, ethnicity, religion, gender, or sexual orientation. The loan is approved and the homeowner instantly receives a congratulatory email or text message. But the benefits of that scenario lie deeper than this good news.
In this situation, the need for non-process related disclosures goes to nil. Consequently, operational costs plummet and consumers save personal time, amounting to lower rates and fees paid for the loan.
Additionally, this aforementioned process is convenient for everyone. No matter the borrower's proximity to the local bank or their availability during typical banking hours, all resources are accessible virtually, 24/7.
Lastly and most importantly, borrowers can finally be assessed fairly, not by the color of their skin, their sexual orientation, their religion, or their gender, but solely on the content of their application.
Equality, at least in terms of lending, may be closer than we think.
Jason van den Brand is founder and CEO of Lenda, the first platform that helps home owners get a refinance online from start to finish. Based in San Francisco, Lenda graduated 500 Startups in summer 2014 and secured funding from prominent VC's including Tom Fallows of Google Shopping Express, Structure Capital, Winklevoss Capital and China Growth Capital.
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