3.4 million American renters are ready to make the leap and buy their own home, according to Freddie Mac.
The largest untapped market (and who are fast becoming the majority of new homeowners, with estimates at 80% of new homeowners in the next 20 years): low-to-middle-income consumers in under-served communities—especially communities of color.
The challenge: for communities of color, when it comes to the homebuying process and working with a bank or lender, the weight of history enters the room. The legacy of redlining is still keenly felt, especially among African Americans. Discriminatory practices are unfortunately not a thing of the past:
Black Americans still face disproportionate mortgage denials. In 2020, one major bank approved only 20 loan applications from African Americans, with an 82% lost opportunity rate—including 19 who abandoned the process altogether, frustrated and disgusted.
Is it any wonder that distrust and suspicion of the process remains a significant barrier to entry to homeownership?
But denials aren’t inevitable. Many of those who were turned away could have qualified for a mortgage if they’d gotten the right advice at the right time.
To better serve diverse audiences—and tap millions of dollars in new opportunities—it is imperative that you collaborate with the right liaison, who can offer a warm introduction and properly prepare hopeful homebuyers to qualify for a loan.
The little-known answer that can cut your denial rates in half.
If you’re like many of the professionals we work with, you’re dedicated to greater equity and inclusiveness in lending. You work with people of color and other diverse groups on both sides of the desk.
Today’s mortgage professionals are more informed than ever when it comes to following laws like the Fair Housing Act and Community Reinvestment Act. They process applications as required—but that’s often the end of the story.
And we know: regulations prevent you from giving prospective customers financial advice, even when you see an application you know will likely get denied.
The consequences when a mortgage application is denied go far beyond the transaction.
All too often, the applicant drops off your radar—not because they’ve given up on homeownership, but because they’ve given up on you.
A mortgage rejection feels like betrayal. Far from being “just math,” it’s taken as a rejection of the applicant as a person. And research shows they will take that negative experience and tell everyone they know about it.
That message often ripples out to 150+ people or more in the community.
That’s 150+ people primed to avoid doing business with you at any cost.
Seen that way, the opportunity costs of mortgage denials are astronomical. Each denial erodes trust in communities where it’s already tough to earn.
But your hands aren’t tied—you have options.
Bringing in the right nonprofit partner changes the equation—and puts in a legal, customer-friendly, fully compliant off-ramp before a denial happens.
By referring customers to a nonprofit credit counselor before denial prematurely cuts off all discussion, they have the chance to make the right moves and prepare. Then, that mortgage-ready customer is sent back to you.
For example, through its national nonprofit network of HUD-approved homeownership counselors, HomeFree-USA has done just that since 1994; 96% of our clients get mortgage approval on the first try and go on to have a 0% foreclosure rate.
Finding the right nonprofit partner for your business.
Plenty of Americans wince when they hear “credit counseling.” And for good reason.
There’s a cottage industry of so-called credit counselors who do little of value. Customers come with high hopes (and pay equally high fees) but are left with confusing, contradictory advice. Often, their credit score doesn’t budge.
Nonprofit credit counselors (like HomeFree-USA) are different. They’re dedicated to helping underserved clients reach the dream of homeownership. They can have candid talks and provide advice you can’t—potentially making the winning difference for everyone.
Here are some ways to know you’re dealing with legitimate experts:
- Look for HUD credentials
HUD-approved nonprofits often go through hundreds of training hours, including continuing education, to provide factual and accurate insights.
- Focus on pre-vetted firms
Start with nonprofits and other organizations you know you can trust. Then, look for long-standing affiliations— “known names” who’ll vouch for a service.
- Network at quality events
Events like the Reaching Millions Leadership and Business Development Conference, now in its 14th year, attract enduring industry organizations.
- Look for HUD credentials
How to integrate nonprofit partners into your workflow.
Once you’ve found the right nonprofit partner, it’s essential to educate your team on how to use them to the utmost.
It’s not enough to suggest credit counseling after a denial. Denial severs the lines of communication—anything you say is met with a “yeah, right.”
Loan officers must ask the right questions (within the bounds of compliance) to know when a nonprofit credit counselor may be a helpful ally. And they must learn how to frame that as a productive next step, not a detour or denial.
Mortgage professionals who’ve never worked with a nonprofit before might wonder if they’re letting business walk out the door. Referral to a nonprofit end with them returning the customer to you when that person is ready.
That may be months later—but later is better than never.
And never is exactly what a denial represents.
Relationships are the real opportunity in your community.
As a mortgage industry expert, you understand the power of a personal introduction and warm hand-off from somebody who both parties trust.
You already know how important historically under-served communities can be to business growth. But you need the right connections to spark those all-important relationships. And that’s where Reaching Millions comes in.
The Annual Reaching Millions Conference is one of the most influential in the mortgage industry. It unites nonprofits from around the U.S. with mortgage industry thought leaders for a truly unique opportunity to connect.
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