OCC to explore alternative credit metrics

Anna Moneymaker/Bloomberg

Acting Comptroller of the Currency Rodney Hood on Monday said his agency would explore potential ways banks can use financial technology, instead of traditional credit models, when evaluating borrowers who have historically struggled to obtain loans.

Speaking at the National Association of Hispanic Real Estate Professionals' Homeownership and Housing Policy Conference, Hood said financial technology companies could help gather data on applicants — like self-employed people, who in some cases may lack traditional income or a credit score — to help banks evaluate borrowers' ability to repay. 

"Why not use financial technology to track their cash flow?" Hood posited. "They may not have a certifiable credit score, but you can certainly look at cash flow as an opportunity to see about the ability to service a mortgage, so I am very much in favor of technology coming together with banks."

Hood said he was concerned that self-employed borrowers often struggle to obtain mortgages and assured the real estate professionals that he would bring this issue to Project REACh — an OCC initiative started under the first Trump administration aimed at expanding financial inclusion. REACh brings together banks, community organizations, businesses and tech leaders to remove barriers that prevent underserved populations from fully participating in the economy. The project was continued under the Biden administration. 

During his tenure as acting comptroller, Hood's predecessor and Biden-appointee Michael Hsu made financial inclusion a central priority. Hsu, like Hood, championed Project REACh, securing commitments from banks to support minority depository institutions, expand homeownership opportunities and develop alternative credit assessment models. He consistently emphasized that financial inclusion must be pursued alongside financial stability, arguing that both are essential to a healthy banking system.

A Federal Deposit Insurance Corp. survey last year found approximately 19 million households — 14.2% of the nation — are still classified as underbanked, a term defined as a household relying on nonbank financial services even though they have a bank or credit union account. The disparities in banking access are exacerbated for racial minorities, even at every income level. 

Another former comptroller — Eugene Ludwig —  has also emphasized the need for regulatory changes and infrastructure to harness this data for fairer credit evaluations. He said last year that alternative credit data, such as bank transactions, could modernize underwriting and improve risk assessments, as traditional credit scores are outdated.

Hood's remarks evoke the work of Project REACh's Alternative Credit Assessment Workstream, which aims to help credit-invisible individuals qualify for loans. Hood also highlighted the Project REACh summit in New York in April, where banking and community leaders will discuss strategies to expand financial inclusion. 

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Emphasizing his commitment to actionable change, Hood pledged to integrate concerns like self-employed borrowers' mortgage challenges into the OCC's agenda, saying he as a person of color understands the issues more personally. 

"I come from a community of color, oftentimes I'm that only person in the room of color," he said. "So I can talk about the unique needs and challenges that individuals face. I'm able to be that voice."

Hood also addressed the recent shifts in the banking regulatory environment. Under the Trump administration, federal regulators, including the OCC and FDIC, downsized operations, cut staff and rescinded some regulations. While the administration says its deregulatory efforts aim to boost economic growth, they have raised concerns about future instability and weakened regulatory capacity. Hood said he would prioritize "risk management, not risk avoidance" in regulating national banks.

"Regulation needs to be effective and not excessive," he said. "Having a regulatory burden, I don't think that's going to move the needle when it comes to getting banks to adopt some of the things that we really want to see on the horizon."