Last week, I pointed out how minorities are losing ground when it comes to having a fair shot at homeownership. I described a recent study that found that Blacks and Latinos make up 12 percent and 17 percent of the U.S. population, while only accounting for 3 percent and 5 percent of conventional mortgage applications.
With minorities expected to make up most of the U.S. population in coming years, minority homebuyers MUST be the focus of future homeownership efforts if the mortgage industry will continue to grow.
Minority homebuyers want to succeed but we need to work together to make sustainable homeownership possible. Lenders can’t do it alone. In fact, here are three things minority homebuyers need to be successful that lenders simply cannot provide.
Time. The job of a loan officer is to evaluate and approve mortgage applications. Lenders don’t have time to show applicants how to clean up their credit so that they qualify for a loan. Yet, many minority homebuyers have credit problems that prevent them from being approved. For example, a study conducted by Demos and the NAACP found that just 66 percent of African American households had a credit score of 620 or above, compared with 85 percent of White households. Unfortunately throughout the mortgage crisis, too many minorities have been preyed upon and others have simply not been taught the importance of financial management. Minority homebuyers need someone who has time to show them how they can improve their credit, and make sure they are mortgage ready when they actually speak to a lender.
Reassurance. There’s no doubt the mortgage industry took a hit during the Great Recession. In fact, the financial services industry is among the least trusted industries in the world, with only 51 percent of people trusting banks, studies show. Minority homebuyers need a third-party entity who can step in and build a more trusting relationship between lenders and consumers.
Handholding. Many minorities are the first in their families to be homeowners so the entire homebuying process can be frightening. Lenders don’t have the staffing capabilities to give first-time homebuyers the handholding they need. They don’t have time to answer all of the many questions about credit and down payments and closing costs. They need a partner who can be the guide that homebuyers are looking for.
Nobody has all of the answers or all of the solutions. While lenders do provide the financing to make many homebuyers’ dreams come true, they must reach out to partner organizations – in particular HUD-approved intermediaries like HomeFree-USA -- to help them get minority homebuyers to the finish line. We can make life simpler for lenders by aligning them with credible and performing nonprofits in cities across the country, bringing them mortgage-ready homebuyers, and making them look good to the public.
For lenders, that’s a whole lot of value. Plus, the entire industry is depending on it.