September 15, 2019

C-Suite, Loan Officer, Origination

Minority Household Growth is an Opportunity for Mortgage Lenders

The demographic makeup of the US is shifting, providing new opportunities to offer sustainable homeownership to the growing segment of minority borrowers now in the market. To best serve customers, it’s important to have a complete understanding of the housing market.

Harvard University’s Joint Center for Housing Studies estimates that nearly 77% of our nation’s household growth over the next decade will come from minority-headed households. As a comparison, as recently as 2012, fewer than 30% of US households were headed by minorities. The Asian American/Pacific Islander community is the fastest growing segment of the US population according to the 2018-2019 State of Asia America report produced by the Asian Real Estate Association of America, in conjunction with RE/MAX and Freddie Mac.

Let’s break down the market opportunity and see how lenders can better serve their minority borrowers.

Strategic partnerships can help connect lenders, agents and borrowers

Industry participants can benefit from partnering with top diverse real estate trade associations, including the National Association of Real Estate Brokers, the National Association of Hispanic Real Estate Professionals, and the Asian Real Estate Association of America. Each of these organizations has a mission to expand homeownership for their respective minority constituents through education and advocacy. Working hand-in-hand with these organizations enables lenders to connect with agents and better serve borrowers in these communities.

• National Association of Hispanic Real Estate Professionals 30,000+ members; 70 chapters
• National Association of Real Estate Brokers 10,000+ members; 93 chapters and affiliate organizations
• Asian Real Estate Association of America 17,000+ members; 39 chapters

Private mortgage insurance can bridge the gap

Saving enough money for a large down payment continues to be the greatest hurdle to homeownership. This is especially challenging for first-time homebuyers, including minorities. Private mortgage insurance, which helps low- to moderate-income borrowers purchase a home with less than a 20% down payment, is a financial tool that can allow qualified homebuyers to purchase a home sooner, with less money down.

Minority borrowers are often unaware of the ability to purchase sooner with mortgage insurance. NAHREP’s 2015 State of Hispanic Homeownership Report revealed that more than a third of Hispanic consumers are misinformed about down payment requirements, thinking a 20% down payment is mandatory. Helping your borrowers understand their options can help more minority homebuyers realize their dream is within reach.

Educating borrowers about financial assistance options can help with affordability

There is an opportunity to better educate minority borrowers about down payment assistance or grant programs that states, municipalities and nonprofits offer first-time homebuyers. There are a variety of programs that offer favorable mortgage terms, grants, or gifts for families that qualify (typically low- to moderate-income). Fannie Mae’s HomeReady® or Freddie Mac’s Home Possible® programs provide lower loan pricing and reduced MI coverage. Other aid may be available through state Housing Finance Agencies or national programs like NeighborWorks America.

Conclusion

The growth of minority populations and projected increases in their homeownership provide significant opportunities for mortgage lenders. Minority households are seeking solutions across the entire mortgage value chain, including tailored products and services. For lenders, it boils down to being a valuable financial partner, with a focus on serving the specific needs of these populations.

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