If you’ve been paying attention to housing finance policy over the past few years, Special Purpose Credit Programs (SPCPs) have emerged as a topic of interest to federal financial regulators, the public policy community, and to large lenders. In a nutshell, SPCPs are lending products and programs that are designed to help out economically disadvantaged groups, and can actually be targeted to benefit protected classes.
What makes SPCPs possible is the Equal Credit Opportunity Act (ECOA), which simultaneously prohibits discrimination while also stating that it is not considered discrimination when a for-profit organization extends - or refuses to extend - credit offered through a special purpose credit program in order to meet social needs. Regulation B in turn contains the regulations that implement ECOA, and provides for the standards that need to be met for SPCPs.
So why would an organization choose to offer an SPCP?
It could be a case of them recognizing an opportunity to do good for a segment of society that could use additional help. Another possibility is that perhaps they have become aware that they have not been serving disadvantaged groups to the extent that regulators or the public at large expects them to, and recognize SPCPs as an efficient means to remedy that situation. Finally, it could simply be that in a market where competition is fierce, and growth is hard to come by, that SPCPs create an opportunity to generate additional business both today and in the long term – even if it might involve a bit more effort.
While there are many steps involved in getting an SPCP created and making it successful, there are three major phases to consider:
1. Determining the need.
2. Designing a product that can make it through the approval process and be successfully launched.
3. Monitor and iterate.
When it comes to determining the need for an SPCP, there’s no substitute for using data. While the Home Mortgage Disclosure Act (HMDA) data is incredibly robust, it can be cumbersome to use as you’re talking about millions upon millions of records – and then you also need to consider census and possibly Community Reinvestment Act (CRA) data, and figure out how to get everything to play together nicely.
Thankfully, Polygon Research has done this work, and it forms the basis for our SPCP In-A-Box offering. Even though we offer a point-and-click experience to navigate your way through massive amounts of data from the comfort of your browser window, we also know that you’re going to need some support, and we’ll help make sure that you’re harnessing the power of our tools to get your SPCP off on the right foot.
Determining need is a strategy health checkup - it will yield insights about your product-market fit and whether SPCP makes sense for you right now. If the answer is yes, and you begin designing your product, your need for data naturally continues: you’re going to have some hoops to jump through in terms of getting things socialized internally and approved, and also soliciting input from relevant regulators – just to be safe. SPCP In-A-Box might be the right tool for you, or you might want to consider bringing us in to deliver PREMIUM SPCP Analytics. We can meet you where you are and do all the heavy lifting to help you get your SPCP into the marketplace.
Finally, there’s monitoring and iterating. Again, this is a place where our PREMIUM SPCP Analytics can help make things easier for you, with custom dashboards and measurement frameworks, you will be the first to know when course corrections are needed.
SPCPs no longer need to be restricted to large institutions with headcount and resources to spare. With Polygon Research as part of your team, you’re getting the benefit of economies of scale when it comes to harnessing the power of microdata while being able to work directly with experts who are directly invested in your success.