01 Apr 2021 Mortgage Move Puts Minority Opportunity at Risk
While it may not have received a lot of attention, there was a recent major announcement in real estate and banking that could have a substantial impact on minority and working class homeownership.
United Wholesale Mortgage (UWM), a large home loan lender, made an aggressive move by announcing that it would no longer work with brokers who work with smaller lenders Rocket Mortgage and Fairway Independent. UWM is opposed to the direct-to-consumer models used by these companies.
In a Newsmax commentary, Project 21 Co-Chairman Horace Cooper calls this new policy “bizarre, anticompetitive – and unethical.” He also says it would have “discriminatory impact.” In making this case, Horace writes:
As a result, [brokers] will not be able to effectively shop rates and products from the entire pool of lenders. Fewer choices for consumers will likely lead to higher costs and rates and thus fewer homeownership opportunities.
Higher costs and interest rates are never a good idea, but this is particularly true for the working class and minorities.
Horace notes that disparities exist – such as low incomes, credit problems and a lack of overall wealth – that impact minority and working class households. This shrinks options, and raises the possibility of even those who qualify for loans risking foreclosure during an economic downturn because the best options were not available to them.
That being said, homeownership is not something that should be avoided:
Homeownership has historically been an important means for all Americans to accumulate wealth — in fact, at more than $15 trillion, housing equity accounts for 16% of total U.S. household wealth. Homeownership doesn’t just reflect wealth creation — it’s also associated with strong and stable communities.
Furthermore, home ownership corresponds with improved health for all members of the household, increased volunteerism and less crime in the community as well as the development of vibrant and well-adjusted families overall.
This is what makes UWM’s decision so troubling. Horace points out that “[t]he timing of this decision could not be worse,” considering that developments in artificial intelligence could “substantially reduce racial and class disparities in mortgage lending.” He explains:
These technologies do a better job of matching applicants with lenders than the traditional loan processes by being able to consider almost every conceivable lending option.
And this technology doesn’t require any reduction or lowering of underwriting requirements either.
The new UWM policy threatens to be an impediment to affordable homeownership and “could drive the housing wedge [between rich and poor] even wider.” Horace calls it an “anti-consumer policy.”
Opening up consumer choice to help find the best opportunities for a household’s particular needs is the most prudent strategy, and UWM’s new policy will have exactly the opposite effect. Horace advises:
With the right policies, the United States can return to the booming economy that lifts all boats — black, white and brown.
To read Horace’s complete commentary — “Mortgage Company’s Demands Will Do More Harm Than Good” — click here to go to the Newsmax website.