What is the mortgage business to make of the persistent disparity in mortgages granted to the majority and minority populations in this country?
An opportunity to make money, if they’re smart.
The 2011 Home Mortgage Disclosure Act figures underline it yet again. Lenders made $241 billion out of $1.4 trillion in mortgages to minorities, or about 17%. That’s inched up from 16.7% in 2010, but is still well below minority representation in the population.
What are the reasons for this disparity? Poverty and poor credit histories or ratings are legitimate business reasons for denials.
People who can’t pay back mortgages should be renters until they can (and let’s not assume they can’t ever).
But that can’t explain the whole amount. Let’s ascribe this to “intangible” factors without falling into a huge vat by talking about race or ethnicity.
It’s clear to us that some of these intangible factors, though, are standing in the way of what could and should be profitable business for mortgage lenders.
These are potential borrowers that are qualified right now for loans or who could be qualified in a year or two with proper effort (getting a home loan should never be a snap) and counseling.
How big a market is this? Let’s assume roughly a third of the country is minority. That would be $466 billion of last year’s $1.4 trillion.
Subtract the $241 billion in minority mortgages made. That leaves $221 billion. Let’s say half of this amount is a viable borrower or one that could be made so.
That would be $110 billion in additional mortgages. Let’s round it down to $100 billion.
Is there any mortgage lender that should turn up their nose at a pot of $100 billion in mortgages? Don’t think so.
But just as we required an effort to be made by the borrower just now, an effort needs to be made by lenders as well. These aren’t the easiest mortgages to find or do. But it’s time to lace up your shoes and go and find this volume.
Is there any lender that thinks the current refinancing boom will last forever? Is there any lender that doubts that the purchase market is where the health of the business lies? Mortgage lenders are good with numbers. They should add these up.
