It goes without saying that lenders in today’s housing market face a much more burdensome task than their predecessors of just ten years ago. The financial crisis of 2008 forever changed the face of the American economy. The federal government enacted stringent regulations, which were designed to protect and prevent consumers without sufficient means from assuming “overly-burdensome” financial obligations. The recession also prompted many lenders and banks to re-evaluate their own general lending practices and qualification parameters, making it much more difficult for those consumers with less than stellar credit to obtain a mortgage. Implementing those barriers was necessary in some cases. In many others, consumers who would otherwise qualify for a mortgage are denied every day, irrespective of their actual ability to pay back those loans, because credit scores are now weighed so heavily.
The aforementioned regulations promulgated by regulatory agencies and banks, alike, have made it much more difficult for loan officers to convert their leads into actual mortgages. Rising interest rates have also exacerbated the conversion difficulties by shifting trends from refinancing to much more of a purchase market. Finding a first-time homebuyer, who actually has the necessary credit score to qualify for a mortgage, is becoming more difficult by the day. According to a 2016 study published by the Federal Reserve Bank of New York, more than one-third of Americans have a credit score below 620. Even more alarming is the CFPB’s 2015 study that found in addition to those with poor credit, there are another 45 million adults who are either un-scoreable or who do not even have a credit score.
The statistics seem to paint a bleak picture for loan officers and lenders, alike. Today, younger groups (such as millennials) who have the necessary credit do not prioritize home ownership, and those who do desire to purchase do not qualify. What if, however, there was a way to convert those unqualified applicants into viable candidates? What if there was a way to tap into a market that was previously inaccessible? Well, the good news is that there is a way. Not-for-profit companies have taken notice of the credit problems facing would-be home owners, and have gone to great lengths to work with those unqualified applicants to rebuild their credit while providing financial education.
Loan officers across the country have begun to utilize non-profits by referring their unqualified leads for coaching and education. After the applicant completes the necessary courses and programs, lenders are often able to recapture those leads who now qualify for the financial product for which they initially applied. Although the not-for-profits were established for the purposes of helping those seeking to turn their dreams of home ownership into reality, lenders have become an indirect beneficiary of their services via an ever-increasing qualified applicant pool.