Guest Blog: Can Lenders Prioritize Borrowers of Color?

The FWD #G21 • 414 Words

by Amelie Rives

Lenders can serve BIPOC households through Special Purpose Credit Programming.

The short answer that most are familiar with is no, lenders cannot prioritize borrowers of color. 

Lending on the basis of race is prohibited and made illegal by fair lending and fair housing laws. This is for good reason after a long history of systematic and legal discrimination by financial institutions against people of color. Such actions actively prevented these and other groups from safely storing their money, accessing wealth building opportunities and fair lending terms, and/or obtaining insurance. These groups were unjustly considered “too risky” for financial opportunities.

The long answer to that question, though, is yes. Lenders can lend on the basis of race by utilizing a unique regulation called special purpose credit programming.

Special purpose credit programming allows lending to specific groups as long as the program serves a “special social need.” This lending is allowable by Regulation B, a portion of the Equal Credit Opportunity Act that prevents creditors from collecting personal information (like demographics) that has no bearing on the borrower’s ability to repay. Special Purpose Credit Programs need to be reviewed and vetted by bank regulators, who confirm the intention and efficacy of the program over time. 

More recently, special purpose credit programming has been utilized to underwrite to Black-owned businesses in the wake of COVID and the Paycheck Protection Program’s (PPP) disparate lending outcomes to Black borrowers

So why lend on the basis of race? 

The racial wealth gap is persistent. According to the Economic Policy Institute, average wealth for white families is seven times higher than average wealth for Black families. Nationwide, the homeownership gap between Black and White Americans has widened since 2004. As homeownership is the primary pathway for increasing wealth and assets for most American households, the homeownership gap for Black households is an indicator of deeper systemic issues within the financial system. 

In Virginia, the homeownership rate for Black households has only risen five percent since 1940, compared to 20% increase since 1940 for other Virginians. Broken down county by county, in one-third of Virginia’s counties, the homeownership rate for Black Virginians is lower today than it was in 1940. 

Special purpose credit programming (lending on the basis of race) can increase access to mortgages or business loans to systematically marginalized communities, who have historically and continually been denied access to this kind of lending. Special purpose credit programming that focuses directly on BIPOC households challenges these criteria and this system.


Amelie Rives, MURP, is a Senior Associate with HDAdvisors. Prior to moving into the affordable housing field, Amelie worked in CDFIs and was a certified financial counselor for six years. She supported and helped underwrite special purpose programming before it was cool, and in 2021 helped develop a special purpose credit policy to better serve women and BIPOC business owners.

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