How Affordable Housing Treasury and Payments Shift During an Economic Disruption

Recent economic disruptions have caused companies to re-examine their financial processes, including treasury and payments. Partner Insights spoke to Angela Kuo, head of Community Development Banking Treasury Services at JPMorgan Chase (JPM), about how affordable housing companies are adapting to our current economic uncertainty.

Commercial Observer: How has recent market disruption impacted cash management for clients?

Angela Kuo: The recent market disruption has caused a number of issues regarding operations and cash management. Real estate companies tend to hold a lot in deposits, especially over the $250,000 FDIC-insured limit. When disruption began this year, we started having conversations with clients around diversifying and staggering their liquidity structure, focusing on stability and safety. In the affordable housing space in general, but especially property management, organizations tend to concentrate their primary operations with one institution for ease of business. The volume of transactions they have to maintain and process is tremendous. If they have 30,000 units, that means they’re collecting 30,000 rent payments every month, plus they have building and maintenance payments, utility payments and reconciliation of all these transactions. This has forced affordable housing clients to think about who their long-term bank is, and whether their bank can handle the volume, and any market disruption in the future.

How is JPMorgan Chase providing that safety and stability for its clients?

The diversity of JPMorgan Chase makes us well positioned to handle any volatility. Our approach to financial management has allowed us to achieve a market leadership position in liquidity strength throughout any cycle. Additionally, we also know it’s important to have a partner that understands our clients’ business. While Community Development Banking (CDB) has been around for a while, the dedicated treasury team is relatively new, and all we do is focus on CDB clients. When they have concerns about liquidity and the market, we understand how to address them as we are uniquely informed on the nuances within this industry. Our team is national, and as such we see what’s happening in every market, and we’re able to address the shifting needs.

What trends are you seeing in online payment fraud, and what are the implications on affordable housing?

We continue to see increased payments fraud each year, mostly via three key methods: business email compromise, malware, and social engineering, which is essentially using manipulation and human interaction to get people to divulge confidential information. For example, a bad actor might call and say, “Hi, is this Angela?” If the person answers, the scammer now has their voice and name for future fraud attempts.

The 2023 AFP Payments Fraud and Control report found 65 percent of companies experienced some type of payments or cybersecurity fraud in the past year. It’s really important to keep all of your staff training up to date — not just your accounting and IT staff — so they’re not clicking on dangerous links.

As for payments fraud in the affordable housing space, our clients send a lot of wires for closings, insurance or escrow, and many also still pay by check. It’s pretty easy for somebody to take a paper check out of the mail and change the beneficiary to their name. So when we talk about how to combat fraud, it’s really important for companies to employ fraud prevention tools like Check Positive Pay and ACH Debit Block, and also move toward digital forms of payment which have better safety controls. At JPMorgan Chase, we have a cybersecurity team that will host private and customized webinars to train stakeholders within our clients’ companies to ensure all staff are up to date on how to limit fraud. Education is critically important here.

How else is JPMorgan Chase serving the affordable housing space?

Back in 2020, JPMorgan Chase committed to investing $30 billion to support racial equity to help bridge the racial wealth gap in the U.S. A lot of those funds are being funneled through the CDB team to help grow the affordable housing supply. Additionally, we have also partnered with a number of minority depository institutions (MDI) to provide guidance, access to proprietary solutions, and monetary support. Many of these MDIs also work with our Community Development Financial Institutions and affordable housing clients.

Specifically, in the treasury space, we’re creating financial literacy programs in conjunction with our branch community managers —sharing topics like why it’s important to have a bank account and how to start saving. In addition, we are finding ways to help support turning on-time rent payments into positive credit reporting, which is a win all around. By focusing on the resident, that in turn helps our affordable housing clients, and ultimately helps build thriving communities.

Why is positive credit reporting for rent payments such a significant factor for affordable housing?

This is uniquely important to affordable housing, as a large percentage of affordable housing residents are unbanked because they simply don’t have a high enough credit score to get a bank account. Because of this, many traditional avenues for paying rent are unavailable to them. So they have to pay rent by money order or other unconventional forms of payment, which can be cumbersome, time-consuming and costly. It can cost these residents $10 or more to pay rent each month, depending on the method.

We’re piloting an offering that extends positive credit reporting services to our clients and their residents. Essentially, any on-time rent payment would be reported to the three major credit bureaus as an on-time debt payment, enabling residents to increase their credit score to a level that allows them to open a bank account. This is just the first step in a multi-step financial journey that could eventually lead to home ownership. This also helps affordable housing owners as well, because it encourages on-time payments and helps build stronger communities, which is a common mission we all share.

How do treasury services help real estate companies of all sizes scale their operations?

Everything treasury services offers is essentially geared toward helping clients become more efficient so they can scale larger; whether it’s by streamlining transactions through automation, properly structuring accounts and processes, or uncovering opportunities for cost cutting and increased return. Real estate is an incredibly high-volume transaction industry, and as your portfolio grows it can be cumbersome to manage all of this while still maintaining staff at cost-efficient levels. Even something as simple as creating groups of properties on your online banking platform can save hours of work per week on reconciliation and payments. Working with a firm that can advise you on industry best practices while also being able to provide the necessary technology and safety is important as you grow and look to scale your business.

View more articles on affordable housing here.