Reaching Underserved Borrowers Remains Problematic

BOSTON–America still has an underserved borrower problem–something that “has been a problem for decades,” said Steve O’Connor, senior vice president of public policy and industry relations with the Mortgage Bankers Association.

“This is one of the most important issues facing us,” said Glenda Gabriel, neighborhood lending executive with consumer lending with Bank of America.

Here at the MBA Annual Convention & Expo, a panel of affordable housing experts addressed pervasive issues affecting the underserved housing community in the United States–a sector, said Patty Arvielo, president of New American Funding, Los Angeles, reflects one of the fastest-growing populations.

“This business is to serve the underserved,” she said. “This issue is the crux of cultural diversity.”

Bruce Marks, CEO of Neighborhood Assistance Corp. of America, Boston. said the lack of affordable mortgage products continues to be the issue. “At the end of World War II if you were white you could access the VA bill and low down payment programs that weren’t available to blacks and other minorities,” he said. “We have to look at the fundamental underwriting criteria, adjust the criteria and get those products out there.”

With NACA, Marks said, there is one product: no down payment, 30-year fixed rate. “We have a great relationship with Bank of America,” he said. “There is a huge demand for this product. We’ve had 1,000 people at a recent workshop; we had another in which we had to cut off registration at 800.”

“A lot of people need down payment help,” said Marcia Griffin, president of HomeFree USA, Detroit. “Even if you have a decent salary and work with organization like HomeFree to get your credit up, there just isn’t enough money to cover closing costs and other fees…”

Griffin said many of the people HomeFree works with really want the opportunity of homeownership. “There are a lot of people, particularly single women, who need to be encouraged to walk through a process that is not as simple as it should be, to work with a lender who can assist them,” she said. “There has to be a message of empowerment and motivation; we are in the business of guiding them in that way.”

Marks asserted the mortgage crisis showed that credit scores determined who foreclosed. “We found that people who had lower credit scores were structured to fail,” he said. “Now we have credit-based underwriting, which keeps minorities out of the homebuying process…let’s look at the fundamentals; a fixed, affordable mortgage product works; let’s talk about product, not counseling.”

“There has to be more education,” Gabriel countered. “We know of so many people who have great credit scores–750 and higher–who are afraid to go through the mortgage process because they all know someone who has gone through foreclosure. Our experience is that those who have some education about the process make better, more informed decisions, budget better, and can have a smoother process.

“We don’t want people to lose their homes,” Gabriel added. “If you witness some of the people who come to some of our events in which they said they signed up for something that they had no idea what they were signing up for. It’s about family and lives and it’s about building equity. We have people who said they want to put money down because they want to build equity.

“The product is important, but so are the people,” Griffin said. “We have to reach out more; we have to teach more; we have to do more.” We have people who are dying to become homeowners; they want to work with people who you trust. At the end of the day, you want to work with people you trust.”

“You have to look like the people you serve,” Arvielo said. “Five years ago our business was pretty ‘white.’ Today, our top producer is a Latina; our second-best producer is a woman; our third-best producer is a Latina; our fourth-best producer is a veteran. You have to be the face of who you serve.”

Griffin cited a lack of integration and few partnerships that exist between non-profit organizations and mortgage lenders. “Non-profits are a tremendous avenue for borrowers who you aren’t currently dealing with,” she said. “We can help you build your brand and who work with almost-ready borrowers. We are the vehicle for getting them ready and we are the catalyst for helping you ensure that your customers have a good experience when they work with you. This is the greatest growth are for the mortgage industry and we need to work more together.”

“This is something that I want to do, not that I have to do,” Arvielo said. “Part of it is the passion for my culture as a Latina. I can speak Spanish fluently and can work with the Latino community. But I want to change the way Latinos live in America. They yearn more than any other segment in America. They can do that and they are successful. But the way we are looked at is where I find that we are underserved. A big thing with us is foundation and trust. If they don’t see you as understanding them, then they are not going to do business with you.”

Arvielo said New American Funding recently started an initiative in which Latino loan officers targeted Latino borrowers. “That is what our customers wanted; that is what we provided,” she said.

Panelists were asked what one thing could immediately improve conditions for the underserved borrower.

“The ability to buy down the interest rate to zero percent so that they can permanently reduce their interest rate to make it affordable over the long-term,” Marks said.

“Marketing is critical,” Griffin said. “In most lending operations when you’re dealing with organizations like our, we are probably one of the most effective marketing tools that you have. That goes beyond any billboard you’re spending $10,000 a month. You have to spend money to market and think about the messages that you convey to your borrower.

“Be great at the basics,” Gabriel said. “Hire great people who are interested in building relationships. Simplify the process; work with great partners; and do what you say.”

“Get the top of your house–your CEOs, your presidents–to look like your market,” Arvielo said. “The message comes from the top of the house; people will buy into it. If you simply have a multicultural department, it’s not enough.”