MReport April 2022

TheMReport — News and strategies for the evolving mortgage marketplace.

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M R EP O RT | 13 COVER STORY Anywhere. Anytime. MReport Digital Bringing Today's Lending Headlines into Focus, MReport Digital Puts Mortgage Banking News at Your Fingertips Experts you trust. People you know. News you want. MReport is putting essential mortgage market news at your fingertips with our new digital edition, now available online via your smartphone, tablet, or computer. Enjoy the magazine at your desk, and tap into MReport Digital's easily accessible platform anywhere, anytime. Committed to giving originators, servicers, and all lending professionals access to smarter perspectives, MReport believes it's time to think differently about the mortgage industry. Because the American Dream is evolving . . . are you? Subscribe to MReport and MReport Digital now! Call 800.856.8060 or connect with us online at to take advantage of our special introductory offer! powered by THEFIVESTARINSTITUTE education, which we believe is the first step in creating sustainable homeownership. Abelyen // It's not as easy as simply focus- ing your marketing efforts on the minority community and saying you are committed to serving them. Often, that sort of "outreach" comes across as fake. People wonder, "Are you really doing this to help me or because you have to?" On the other hand, if you have a genuine conversation with someone and spend an hour on the phone, breaking down the numbers and explaining how homeownership or refinancing is going to benefit their life and their kids' lives, that's what they appreciate. But there isn't too much of that these days. What are some other steps lenders can take to close the racial homeownership gap? Christensen // Lenders need to be going into minority communities and talking about the benefits of being a homeowner. They should be explaining how home equity can fuel generational wealth as well as the ability to pay for your children's college education or start your own business. In many minor- ity families, these are conversations that don't typically happen at the dinner table. The goal should be building trust with the minority community, which you can do by educating people about the power of home- ownership on a grassroots level. For example, we've partnered with churches in the Black community to host our homeownership seminars. Large lending institutions should also think about partnering with smaller, community banks that serve majority-minority neighborhoods, since community banks are typically more in tune with who their com- munity members are and what they need. Abelyen // What is needed is more com- mon-sense lending by expanding the number of factors lenders consider when determining who is a good credit risk. We have to expand homeownership opportunities to borrowers who have below 620 FICO scores but who have established themselves as responsible consumers. Of course, every loan carries a risk, but any borrower who can document that they can afford a home and has not been late with a payment over the past 12 months should have that opportunity. I think the federal government and Fannie and Freddie can also take some of the good loan programs developed in the private sector and securitize them instead of forcing borrow- ers to pay higher rates. As long as a loan is underwritten soundly, every borrower should be given the same rate. Why is homeowner/homebuyer education so important? Christensen // Education is the first step in creating sustainable homeownership. Many minorities, for instance, are generational renters and simply aren't aware of the responsibili- ties that come with homeownership. I hear questions all the time from first-time home- owners who don't know how to fix this or that. If you grew up in an apartment and your oven stopped working, your parents called the landlord or superintendent. Transferring the utility bill from the previous homeowner to their name is also new for them. It may sound obvious to those of us who come from homeowning families, but if you're the first person in your family to own a home, you don't know what you don't know. That's why CBC provides 18 months of post-purchase counseling to our borrowers at no cost to them. And for those borrowers that need a little extra help, we provide pre- purchase counseling as well. We also require borrowers with low credit scores to meet with a HUD-approved counselor so they under- stand the serious commitment they are taking on and to give them a trusted advisor they can talk to if they need help. How do you motivate loan officers to work with minority borrowers? Christensen // One way is to change compensation models. Salespeople in our industry are motivated to be fast and efficient with their time. There's no incentive to spend extra time and effort working with a borrower who is going to get a much smaller mortgage than a white borrower and who may never refinance. Perhaps lenders could offer a built-in salary increase for loan officers and originators who spend more time working with specific demographics of borrowers who desire to own a home but need extra handholding. At the end of the day, eliminating racial inequities in homeownership will require a culture shift. Ideally, the more minorities we can turn into sustainable homeowners, the more able they will be to transfer their home equity to their children, so they won't need down payment assistance. By helping minor- ity families build a strong financial foundation, we can help turn the generational tide in their favor. Abelyen // Loan officers aren't rewarded for working with minority borrowers—they're judged on profitability. If you spend time speaking with people who are not "profitable,"

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