The estimates for the next ten years are that 50% of the first-time homebuyers from the market will be minorities. Yet, while this appears encouraging, mortgage experts warn that reality is not that bright. In fact, the minorities’ mortgage market share is down by 360 points over the last decade, 25% more than for the white. The paradox is obvious!
This large part of the mortgage market is not buying or it is not being sold to. Lenders know that they need to target minorities, yet the loan volume remains low. Analysts warn that unless the credit standards become more flexible, the market will be seriously impacted.
While solutions to the problem may be accepted enthusiastically or opposed from the start, it is obvious that the dropping rates of homeownership among minorities are a real problem for lenders. Targeting the minorities and actually selling mortgages to them would give any lender a considerable advantage over their competitors.
Improving customer satisfaction is essential for lenders. Experts have tried to identify the things that make customers take action, which either hurts or helps a lender’s business. It seems that the borrower’s satisfaction depends on the lender’s ability to keep up with the initial expectations. A successful strategy is that of providing the client with a written checklist upfront and maintaining it. This approach convinces most borrowers to take action that is good for the lender’s business (spreading the news on social media or referring the lender to friends and colleagues).
In terms of customer satisfaction, studies show that minority borrowers often score lenders higher than white clients. There is also higher likelihood for minority borrowers to use the lender’s services again and to share their experience on social networks. Satisfied clients actually become the lender’s ambassadors in the future.
High-income borrowers with a monthly revenue higher than $12,500 usually score lenders lower than borrowers with a lower income. Lenders have more difficulties pleasing wealthy customers: they qualify easily and they are close within reach on the market, yet, they are difficult to satisfy and seldom refer lenders to others.
This means that lenders have a better chance of achieving their customer satisfaction objectives by lending money to minority borrowers. More business will come in the future if they manage to satisfy these borrowers. This kind of behavior would bring an increase in the minorities’ mortgage market share.
The lender’s priority is to sell not necessarily by changing the underwriting criteria, but by focusing on better customer service. Every client is wanted for business, it’s important to know how to serve them and how to encourage homeownership. Borrowers have many advantages that some lenders are desperate to get, while others prefer to continue to service only a market niche. Yet, the shrinking share of borrowers closes many business doors, and different attitudes are needed to open new ones.