Choosing where you bank can have more of an impact than you may think. Let’s talk about getting intentional, sustainable, and giving back with CDFIs, or Community Development Financial Institutions.
With Thanksgiving around the corner, and the desire to give back at the forefront of everyone’s minds, you might be looking for new, exciting and sustainable ways to help out your community. Well, we’ve got good news — banking with a Community Development Financial Institution is a sustainable way to help underbanked communities all year round.
Banking with a Community Development Financial Institution is entirely unlike banking with a traditional institution. Let’s first look at what being a Community Development Financial Institution, or CDFI, really means.
CDFI is a rare designation for financial institutions, offered by the U.S. Department of Treasury. Of the 5,033 banks in the U.S., fewer than 3% qualify for this title. CDFIs are mission-driven financial institutions that take a market-based approach to support 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.
Being a CDFI, we’re able to directly make a difference. It’s all about how we lend to our unique borrowers.
CDFIs and Lending
Did you know that, in general, the modern mortgage lending system was created to assist a specific kind of borrower? One who “checks the boxes,” has stable W2’s and/or tax returns, one job, and doesn’t present any nontraditional income — That’s the traditional borrower.
But we’ve realized that there is a huge underserved population that isn’t accommodated by this system. They are gig-economy workers (like taxi drivers or nannies), small business owners and entrepreneurs, immigrants, seniors, and more. In order to serve this largely overlooked population of good, reliable borrowers, we’ve launched what we call Non-Traditional Mortgages.
When others say “no,” we may be able to say “yes” with a Non-Traditional Mortgage. These loans allow us to take the extra steps and look at the big picture of what a borrower is bringing to us, rather than ask them to jump through hoops and squeeze into a mold they don’t fit. And Quontic is able to make these loans because we’re a CDFI. In fact, being a certified CDFIs, we’re required to provide no less than 60% of our lending to support underserved communities. Non-Traditional Mortgages make it happen.
In order to approve borrowers for a Non-Traditional Mortgage, we make sure borrowers have the right credit score for a mortgage and a responsibly sized down payment that indicates they have skin in the game. And we permit gift money from family members to be used down payments. Most importantly, for creditworthy borrowers with meaningful equity going into their home purchase, we also relieve borrowers from having to provide traditional forms of income documents, and in many cases we will use a flexible common sense approach to loan appoval when traditional income documents (tax returns, etc) don’t tell the whole story. Although we require larger down payments for these loans, typically 20% or more, it provides the flexibility for non-traditional earners to prove that they deserve a mortgage.
CDFIs and Banking
When it comes to the banking side of Quontic, our mission as a CDFI has fueled the creation of innovative deposit products. Our deposit products are not intended necessarily for our low-income consumers, but rather to drive significant volumes of deposits that we can then use to make mortgage loans to low-income households and in low-income communities. It’s as simple as this: Your hard-earned dollars are able to help communities in need while they’re safely stored with us. And, of course, your deposits are FDIC insured to $250,000 per depositor.
And the best part? The entire process is sustainable. Unlike some other neobanks and digital banks, who use interchange fees earned on their customers’ debit card usage as their primary source of revenue, we give this income back to our customers with our innovative deposit products in the form of high interest rates or rewards in the form of cash or bitcoin. In fact, that’s how we created the nation’s first bank Bitcoin program, Bitcoin Rewards Checking.
We also offer one of the highest yield checking and savings accounts on the market, along with the country’s first Bitcoin rewards program. And we can do this because we’re sustainable by virtue of being a Community Development Financial Institution. Our CDFI status proves good for customers and good for our team members.
If you’re interested in learning more about Quontic, our abilities as a CDFI, and how banking with us can make a difference in your own life, check out our website at https://www.quontic.com/.