We don’t talk much at this event about housing, homeownership and mortgages, mainly on the theory that there are plenty of other conferences covering those topics. But these topics are in fact central to the ultimate ability of the vast majority of underbanked consumers to build and maintain financial stability. So I’d like to use the on-going difficulties in the sub-prime mortgage market to explore the concepts of balance and sustainability in providing financial services for those we focus on in this conference. These difficulties are important for that population because the communities in which they live are being especially hard hit, hurting the dreams and the financial stability of the underserved and their parents, siblings and friends.

Data consistently show that home equity accounts for almost all the wealth of the bottom half of the population. The situation is even more extreme for African Americans and other minorities. This is not surprising: homeownership is promoted as the American dream; it has significant stability and psychological advantages beyond providing shelter; and it is one of the few generally appreciating assets that those with low levels of income or wealth can use leverage—sometimes significant leverage—to purchase.

Over the past 20 years or so, financial institutions have made enormous and important strides in extending the availability of homeownership to those for whom it was often not accessible before 1990 or so: minorities, women, lower-income families. And, especially before the recent events, they uniformly discovered that, contrary to what they had expected, the relationships were profitable and long-lasting.

In some ways, homeownership in 1990 looked very much like transactions and savings do today. The challenge is to use what we’ve learned from homeownership over the last 20 years, and especially the last year or two, to help make the retail financial services experience more uniformly beneficial for both customer and provider. I would suggest that four lessons are particularly relevant.

Perceptions—of both profitability and risk—can differ markedly from reality. This is probably the clearest and strongest lesson. Back in 1985, most banks and the secondary market were just as skeptical about the profitability of providing home mortgages to lower income families as many are today about beginning the financial relationship with today’s underserved population. The skeptics were wrong then, and I submit they are wrong now. The ongoing exploration of using alternative data, such as utility bill payments, to augment credit files is an important step in reducing the perception-reality gap in assessing credit risk.

Technology can make a big difference, but beware of unintended consequences. One of the big concerns in the mortgage world of 1990 was that, because origination costs are fixed over a wide range of mortgage sizes, there was little incentive to originate small loans. These were, of course, the loans that low-income people were most likely to be able to afford. The ensuing years generated a host of innovations that changed the picture. But a look at some of these innovations demonstrates that technological advances frequently have a double edge:

•Automated underwriting vastly reduced the cost of originating most loans, making smaller loans more attractive, but also made it, at least initially, more difficult for those with non-traditional earnings, credit, property or family profiles to get the advantages of the technology or, sometimes, even to get the loan.

•Credit scoring led to risk based pricing, which opened mortgage markets to many more people by allowing price to substitute for rejection, but it may also have led to complacency in underwriting—substituting pricing for standards—that have hurt both borrower and lender.

•Securitization has undoubtedly made mortgage money far more broadly and consistently available by turning local markets first national and then international, and linking housing to the capital markets.

But the very slicing and dicing that enables this to happen at large scale has also created securities with risks virtually impossible to evaluate, let alone price, which in turn has led to too much money chasing too few good loans, another recipe for trouble. Securitization also makes it difficult to unwind problems by modifying loans, especially at scale. It’s gratifying that we’re beginning to see some breakthroughs here, but a stronger effort definitely is needed. So the lesson on technology is that it has been and will continue to be essential to both reaching and serving the underserved population. But watch for unintended consequences.

Partnerships matter, a lot. Much of the challenge in reaching the underserved revolves around segmentation, marketing and outreach strategies. In the homeownership world, while capacity remains a problem, some critical partners, such as the NeighborWorks America affiliates, have made a huge difference in financial institutions’ ability to reach and serve lower income populations well. But it’s critical to understand the role and capacity of partners, whether they are non-profit or for-profit entities; for neither side to over promise on results; and to make sure your partners’ interests are aligned with yours. When partners’ interests are not aligned, as is often the case in the sub-prime mortgage market, where brokers are paid up front with little incentive to produce the loan that is best for the borrower and least risky for the lender, neither borrower nor lender is well served.

Finally, know thyself, and keep checking. Sub-prime mortgages and bounce protection programs have something in common: they both started as ways to extend the benefits of mainstream financial services to those to whom they had been denied, and they both morphed, in many institutions, into profit centers where the interests of the intended beneficiaries were forgotten. One of the especially exciting things about this conference is that it is full of people who believe that they can serve the underserved in ways that truly benefit both sides of the transaction. It’s important to keep checking back with yourself to make sure neither side of that equation gets short shrift.

Those are some of the lessons the world of homeownership, of big credit, secured assets and world-side capital flows, has for consumer financial services for the underserved. We have a wonderful opportunity to learn from both the successes and the mistakes. Let’s take it.