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Mortgage Technology Leads a Silent Revolution in Minority

"Mortgage Technology Leads a Silent Revolution in Minority Homeownership"
By Matthew Cooper
CEO & Co-Founder, EarnUp

Homeownership rates reached a record 50-year low this year, due to a number of different factors, including
residual effects from the financial crisis, a lack of affordable housing options and increased restrictions for
lenders. Unfortunately, the groups most impacted by these barriers are low-income and minority
communities, who already suffer from a long history of systematic economic disadvantages and biases. For
many minority communities, the dream of buying a home has become increasingly difficult to imagine.

Despite these inherent problems, recent new technologies have begun to level the playing fields for all
borrowers regardless of socio-economic level. The digital revolution has disrupted all aspects of the
mortgage process, from the initial consideration through the application process and continuing into the
post-loan borrower experience.

According to Aracely Panameno, Director of Latino Affairs at Center for Responsible Lending, technology
could be the answer to declining homeownership rates among underserved groups. “Technology has the
ability to expand home ownership at all levels, particularly those minority communities who suffer from
significant homeownership disparity and lack of access.”

Technological innovation has the ability to connect any individual to a mortgage industry that is willing and
eager to earn their business, all at a significantly lower cost than prior years. This creates the promise for
helping underserved communities begin to access mortgage services in new ways.

Transforming through Counseling
Financial counseling is an incredible, and often overlooked, resource for anyone interested in borrowing. It
can provide the educational resources to prepare an inexperienced consumer and help them navigate the
many different complexities involved throughout the life of a loan. Mortgage counseling has proven to reduce
delinquencies, avert foreclosures and lower defaults. Despite this, many borrowers do not utilize this
resource mainly due to a major lack of awareness.

Fortunately this has begun to change as many counseling groups have begun to leverage new technologies
to make their services more widely accessible to everyone. Through mobile apps, online videos, and other
online platforms, both nonprofit and for-profit counseling services are able to educate and help the borrower
make informed decisions at a significantly lower cost to the consumer. This becomes increasingly important
when helping low-income and minority communities who often are at a greater risk of delinquency due to
systematic economic disadvantages.

For example, GreenPath Financial Wellness, a national nonprofit with a 50 year history of providing debt
counseling to Americans, continues to pioneer a number of tools and resources to help consumers realize
their dreams though budgeting, debt management and financial wellness practices.

“Consumers need, and deserve, high quality financial services and tools now more than ever, particularly
households in underserved communities,” said Kristen Holt, President and CEO of GreenPath Financial
Wellness. “The new generation of technological solutions enabling GreenPath to better meet consumer
needs is game-changing and has the potential to transform underserved communities across America."

For lenders and counseling groups, it has become easier than ever to take successful programs,

standardize and scale them up to reach more borrowers, anywhere, anytime. Technology has allowed for
these programs to reach previously underserved communities at significantly lower costs, helping these
borrowers better understand and make informed decisions

Optimizing Origination
Aside from outside resources, the mortgage origination process itself has also begun to undergo major
changes as automation, instant reporting and improved borrower experience begin to replace traditional
legacy systems. As the push for automation begins to spread across the mortgage industry, many industry
experts expect a fully digital mortgage experience to become a reality for many borrowers in the near future.

The Importance of Automation
Applying for a mortgage has long been a time-intensive and often inefficient process, filled with loads of
documentation at every stage of the process Industry regulations require mortgage firms to track, sign and
file every document that is passed along in the process. This naturally creates a significant hurdle for
minority and low-income borrowers who may not have the additional time and focus to stay on top of these

New technologies have begun to simplify and speed up the entire mortgage loan process. Third-party fintech
groups, like Blend, as well as in-house solutions like those at SoFi, Sindeo, and Quicken Loans, are actively
working to digitize and automate every step in the process.

“The old industry standards no longer satisfy the modern consumer, who wants a transparent, effortless
mortgage experience,” said Nima Ghamsari, Co-Founder and CEO of Blend. “As online and mobile
technology continues to improve, the entire process will become increasingly streamlined for both borrowers
and lenders.”

Increased Access through Technology
Along with an improved origination experience, new lending programs are working to better tailor their
services to minority and low income communities who do not fit the “normal” borrower model. New
technologies are allowing for lenders to better understand and track smaller, underserved communities and
as a result, push away from the one-size-fits-all model.

One major example of this is with Fannie Mae’s new HomeReady program which customizes the loan
process to fit the unique needs of different minority groups. The program requires borrowers to only pay a
3% down payment up front, removing one of the biggest barriers to homeownership for many. Often these
underserved groups have steady earnings, but simply lack the wealth to make a normal downpayment. With
this option, they are no longer immediately priced out.

Additionally the program allows for applicants to count income from those who won’t actually be the
borrower - particularly useful for multi-generational households where the children and grandparents
contribute to the household income. This allows for the defined borrower to utilize the incomes from the
extended family that will be living in the new home.

By breaking down the traditional lending models, programs like HomeReady are taking major steps forward
in adapting to the cultural norms of minority communities to promote home ownership for all.
These programs rely heavily on analytical and mobile technology to better understand the needs of these
groups and access them in new ways.

Rethinking Financial Health
What is the best way to map is someone is “financially healthy?” For decades, the industry has relied on
credit reports as the main barometer for lending. But in recent years, new financial technology groups are
working to find new ways to analyze a person’s financial situation. These groups are trying to move away
from the traditional method of checking a single credit scores and pushing for a more holistic map of a
person’s financial health.

Tools like Mint, CreditKarma and even the BluePrint app by the Homeownership Preservation Foundation
(HPF) have started helping borrowers better track and manage their financial decisions and goals with
relative ease. These platforms utilize real-time analytics and financial educators to provide information that
helps the consumer understand their options and make solid decisions. The ability to provide this data on
multiple platforms, from mobile to desktop, allows for a level of accessibility that makes improving one’s
financial health a reasonable goal regardless of economic status.

Maintaining Success
Over the last five years, many new groups have begun shifting focus on improving the borrower’s
experience throughout the life of their loans, which can significantly help those underserved groups who
often feel on their own post-origination.

EarnUp, for example, offers a mobile automated payment platform that automatically syncs payments with
the borrower’s income schedule to help them budget and accelerate their loan payments. It essentially takes
the thought work out of paying off debts, allowing consumers to focus on other important areas of their lives.

Aside from helping the borrower manage their payments, these platforms also benefit the servicer by
increasing autopay usage, reducing delinquencies and providing new analytics into borrower’s financial
situation. This translates to a huge risk removal for the servicer, allowing them to be more open to making
the efforts to earn minority and low income communities’ business. It is encouraging to see new financial
tech groups work to tackle serious issues that affect all levels of the population, regardless of economic

Moving Forward
Despite these major advances in mortgage technology, there still remain significant challenges for equal
access to homeownership for minority communities. There are still many systemic problems that require
larger solutions and changes in policy. But we are moving in the right direction. The potential for
technological solutions to transform the lives of millions of Americans as they attain and more importantly,
sustain homeownership is an exciting prospect to many.

This is only the beginning, as government, nonprofit and private sector groups are all beginning to
understand the need to embrace the potentials of technology to transform consumers’ lives.

As Daniel Perl, Chairman and CEO of Citadel Servicing Corporation, put it: “There is a major opportunity for
the mortgage industry to grow, as long as they embrace modern technology and it’s ability to reach home
buyers and all income levels.”