Face to Face

UNDERSERVED BORROWERS WANT LOCAL VS. ONLINE EXPERIENCE

By SARAH WOLAK, STAFF WRITER, MORTGAGE BANKER MAGAZINE

There are apps for everything these days, including mortgages. But while we’re living life in an electronic landscape, not everyone prefers doing business behind a screen.

Maxwell, a digital mortgage platform that specializes in products for small to midsize lenders, found in its recently released 2023 Hispanic American Borrower Report that borrowers want to sit down and get into the nitty-gritty about their contracts. While the report also delves into the diversifying profile of American borrowers, one statistic shines through: 96% of HispanicAmerican borrowers are planning to choose a lender they can meet inperson in lieu of an online-based option.

While Hispanic-American borrowers are predicted to overtake the majority of borrowers’ demographic, they’re not so keen to jump into a digital mortgage experience. Instead, they’re gravitating toward local lenders known within the community.

Maxwell co-founder and CTO Rutul Davè says the reason is simple: They want genuine support.

Davè says there’s a definitive reason why over 40% of mortgages are originated by local small to midsize lenders: People crave the personal attention and guidance that comes along with working with a smaller lender. And, more specifically, underserved, minority borrowers want to make sure they’re making the best choices for their money..

“Part of the mortgage process is wanting to find someone trustworthy that can coach you through the transaction. It’s the biggest transaction of most people’s lives,” Davè said. “There are a lot of terms and concepts thrown at you [during the process.] They want someone they can connect with and who understands the local community as well.”

United Through Community

Small local lenders such as NorthStar Home Loans cater to their communities, and not just through mortgages. The Putnam, Conn.based company makes it a point to expand its outreach beyond the client level.

“In a small business like ours, we’re essentially helping out our neighbors. Locally owned businesses treat people like people, not transactions,” said Jason Verraneault, Northstar’s owner and founder. “What makes us different from a larger lender or online platform is that we’re in the business of building lifelong relationships where my clients will one day refer their kids to us.”

Verraneault’s company is in the northeast corner of Connecticut, known as the Quiet Corner. It’s in the state’s least populous county, Windham County, where the poverty rate sits around 11.5%, per 2020 records.

Verraneault says that the county allows USDA guidelines, meaning that no credit score is needed for a loan.

“We accept down to whatever is allowed by the FHA, which accepts as low as a 500 credit score and 10% down. Most lenders cap at a 620 or 640 score,” Verraneault said. “And with USDA guidelines, we have to work with our customers to help them find nontraditional tradelines for their payment history to prove that they’re fit to own a home.”

Denise Lanouette, a mortgage consultant at Hartford, Conn.based First World Mortgage, says that even though her company has multiple branches across the state, community is still at the core of its foundation.

“Because we’re a local lender, I have a whole network of local trusted financial experts, real estate agents, attorneys, inspectors, and contractors who have worked in these local areas in the past and who I feel confident recommending to customers,” she said. “Local lenders offer personalized service that extends outside of “bank hours” – they are often available evenings and weekends to keep momentum and maintain great communication.”

Like Northstar, Lanouette says that First World partners with local organizations such as the Connecticut Housing Finance Authority.

“We pair with these groups to run workshops and seminars designed to inform potential first-time homebuyers about the fundamentals of financial wellness and the mortgage qualification process,” she said.

And Lanouette says it’s not just customers who care about their lenders being local: it’s real estate agents, too.

“A huge reason why real estate agents prefer local lenders to online lenders is because of a combination of their local relationships, their reputation, and accountability,” she said. “People want to do business with people they know, like, and trust.”

Trust And Support

Verraneault says that working with and being readily available to his clients is just half of the business. The other half is pushing out knowledge and support into the local community, using more ways than just social media to do so.

“Me and my staff are out at events and sponsoring local sports,” he said. “We’re regulars on our town’s local radio show and we also deliver food to a pantry every Wednesday. That’s just the culture of the company.”

Verraneault added that the food deliveries aren’t to promote the company, they are to show clients and potential customers that Northstar cares about the communities in which they live.

“We’re not going to these events and talking about the mortgage world, either,” he said. “We’re being a part of our community regardless of our work.”

Davè says that lenders can make themselves welcoming to customers by providing additional support, such as language help.

“For Spanish-speaking borrowers, it helps if there’s someone on staff to help them understand the process,” he said. “There are also specialized programs that lenders can use to help borrowers better grasp the mortgage process. Maxwell, for example, has a screen-sharing software where a borrower can see their originator’s screen and know exactly what their mortgage is.”

A sad truth about the mortgage process is that the support often doesn’t meet the needs of customers who may need extra guidance.

“Close to 50% of Hispanic borrowers who considered abandoning the homebuying process considered so because the lender didn’t provide enough support,” Davè said. “It’s not just underserved borrowers that want attention either. If you think about the largest sect of homebuyers, which is millennials, we see that they also want in-person experiences and conversations even though they’re usually proficient in technology and online transactions.”