The homeownership rate for Blacks is currently about 44% vs. around 74% for whites, according to U.S. Census Bureau data. But that gap isn’t just huge. It’s also a major contributor to racial economic disparities since, for most Americans overall, the majority of their wealth is derived from their homes.

That’s why Castleigh Johnson launched fintech startup My Home Pathway last year. The goal: to help improve credit scores, so Black households can get a mortgage, while also gaining the financial literacy needed to thrive after they’ve bought and moved into that home.

“We’re out here to crush the home ownership gap in a sustainable way,” he says.

Moving Like a Speed Boat

It was during his time as a bank examiner at the Federal Reserve Bank of New York during the financial crisis that Johnson started thinking he had to do more to address racial wealth disparities in the U.S. Studying the data, Johnson, who also held senior roles with Goldman Sachs, AIG and other companies, saw how alarmingly disproportionate the impact of the crisis was on people of color.

But effecting real change and doing so at anything faster than a snail’s pace required stepping outside of traditional institutions. “With a smaller company, you can move like a speed boat,” he says.

Four years ago, Johnson founded a company called Trifigo that targeted improving credit scores and financial decision-making more generally. But a few years later, he encountered a startling piece of information: In 1968, when Congress passed the Fair Housing Act of 1968 banning the practice of redlining, the home ownership rate among Blacks was 43%. In 2019? It was about the same, if not lower. With that information and other research, Johnson decided to redirect his mission to the matter of homeownership. In March 2020, he changed the name of the company to reflect his pivot.

Enlisting Financial Institutions

Specifically, the company’s platform focuses on helping traditionally higher-risk consumers master financial literacy and rebuild their credit profile. But the key is enlisting financial institutions in the effort by targeting their pocketbooks. “There have to be recurring business incentives,” he says. “We have a blueprint, but we need to partner with the folks who are really going to move the needle.”

To that end, the company works with banks to improve scores of borrowers who are 50 points or so away from the minimum needed to be considered for a mortgage. “That’s people within a striking distance,” says Johnson. “We want to target folks who have an opportunity to get there in a reasonable time frame.” That means consumers who, with six or seven months of work, have a good chance of getting to the finish line. Also, financial partners pay the company only when users make it from high-risk to qualified borrower status.

Staying Engaged

To make sure consumers stay on the path for the necessary amount of time, Johnson developed a system for keeping them engaged. For example, after providing banking information and other data for analysis, users get an initial assessment of their financial picture. Instead of just providing a total score, which might not mean that much to some people, the platform gives them a grade. (Think, you’re a C minus and you need to get to a B).

Then it suggests steps to take to improve that grade. Since most scores are derived largely from payment and credit card utilization history, according to Johnson, common recommendations focus on reducing high credit card balances. That typically involves a repayment plan based on an analysis of the consumer’s cash flow and expenses and how to free up cash that can be used pay down debt.

In April, the company launched its first beta with about 1,000 users, working with First Republic Bank’s Eagle Community Home Loan Program in Northern California. It also was accepted into the first cohort of the EY Entrepreneurs Access Network for Black and Latinx entrepreneurs and Black+, a program of VICE Media Group and the National Urban League, which provides Black-owned businesses with pro bono media campaigns, marketing services and mentorship.