You may wonder why HUD, who is granting $38 million dollars to non-profit organizations, affects the mortgage industry. I will tell you from experience that this has a lot to do with mortgage lending and time and attention should be paid to this issue.
Previous to my position at Optimal Blue, I developed a technology that was picked up by Neighborworks, LaRaza (NCLR) and NCRC, which are 3 powerful government intermediaries for non-profit, community based, housing counseling organizations located all over the country. I traveled all over the country acclimating my product to the home-buying counselors, and in return learned a lot about their world.
This little break from my traditional roles in Mortgage banking taught me about a world that I believed lenders knew a lot about; but in reality we don’t. Yet, it is a world that mortgage lenders should pay close attention to as Fair Lending litigation and scrutiny heat up.
HUD counts on these organizations to be their eyes, ears and educators in under-served markets all over the country, which is why these funds are granted. These organizations are charged with educating the public about Fair Lending practices, mystery shopping lenders and reporting findings to regulators when they perceive that lender’s practices are discriminatory.
The first reaction that many mortgage lenders have to this is antagonistic. Let’s ignore them, go to war with them, or hope they don’t target us, are a few of the attitudes. Prudent lenders take a different approach which is a partnership, and it works quite well.
Having worked directly with and visiting over 250 non-profit organizations, I can tell you first hand that they are no more perfect than lenders. They struggle internally with ethical issues and their staff just like any lender. They aren’t perfect in the way they approach business and lenders are not either. Yet if you can climb over the mountain that separates you and work together, you may find that life becomes easier for both the lender and the non-profit housing counseling agency.
Here are some tips:
- Access to credit in under-served markets is problematic. Make sure you are offering your products to the non-profit housing agencies as much as you are to great real estate offices.
- Home-buying counselors tend to be tougher on clients that they are counseling than just about any lender. Their counseling is conservative, doesn’t over-extend a client, and fully prepares them for the payment and the maintenance of the property. For a lender, this means you are getting access to a great buyer candidate. Most lenders find these loans easier, not harder than a real estate referral!
- Just because a client is in an under-served market, doesn’t mean the loan is complex or bad. In fact, it was my experience that those loans were just the opposite.
- Get familiar with the types of products you will need to offer to accommodate the needs of the under-served communities. After 30 years in this industry I can tell you that my learning curve on their needs was steep!
- If you have a denied borrower, don’t just deny the loan. Send them to a counselor with an action plan on what needs to be cured, so that the consumer has a coach who can help them correct issues necessary to become a homeowner one day. When the client is ready, the counselor will send them back to you.
- If you have a borderline file that you are concerned about under ATR (Ability to Repay), send the client to the home-buying counselor for a third-party objective review of their budget. This documents the file with a budget that you and the HUD counselor approved of.
There are many strategic initiatives that a mortgage lender can employ to become a great example to a fair lending exam team, versus a lender that needs to be fined. While this may have been a “bank” issue previously, it is now a mortgage banking issue and needs to be dealt with.
To Read the Story CLICK HERE!
