There’s More Than 1 Way To Make A Mortgage

An increasing number of Americans have become homeowners during the past 10 years; however, the latest report from the National Association of Realtors (NAR) shows the gap between black and white homeownership is the widest it’s been in a decade. NAR data shows Black American home ownership is 44% compared to 72.7% for white Americans, the former increasing less than half a percentage point since 2011 and the latter jumping nearly 3%.

How can credit unions combat such gaps within their communities? Increasingly, cooperatives are focusing on making mortgages more inclusive.

A partnership with United Ways of Iowa is uncovering insights about employed community members who struggle under limited assets and constrained income. Learn more in “GreenState Foundation Invests In Data To Improve Its Community.” 

Better Programs

To help prospective homebuyers become homeowners, Honor Credit Union ($1.7B, Berrien Springs, MI) identifies an area of opportunity and then tailors a program to piggyback onto its existing selection of home loan options.

“We’ve got to create a sense of belonging for all of our membership,” says Lynneise Gaddie, vice president of real estate lending for Honor. “When you offer various programs, it’s important to ensure they fit your organization.”

For example, Honor offered a minority down payment assistance grant through the FHLBank Indianapolis in September 2023 to help qualified borrowers cover a down payment, closing costs, or housing counseling. Borrowers with other financial institutions snapped up all the grant money — a full $2.5 million — within a month, and Honor learned a few valuable lessons from the experience.

“My team is trained and ready if this program is offered again,” says Gaddie.

The credit union has set a goal to help 10 borrowers receive $150,000 in grant funding during the next potential round. It plans to use key insights from HMDA data to help it promote time-sensitive programs like these more effectively, reaching out via multiple channels directly to minority members who could benefit.

“Even if our member can’t use it, they might have a family member who would qualify,” she says.

Beyond using its own member data to determine for whom it should actively flag solutions, Gaddie also recommends partnering with other companies to further the credit union’s community reach.

Many Different Needs. Many Different Solutions.

Through grant funds provided by the FHLBI, which are typically available for several months, Honor offers down payment and closing cost assistance and  will be able to offer down payment assistance year-round through a new relationship with the Michigan State Housing Development Authority (MSHDA). From conventional, portfolio, FHA, and other traditional loan products to niche offerings that serve specific community needs, Honor has created an all-inclusive mortgage program that caters to a wide variety of financial situations.

It launched its S.T.A.R. Mortgage — Serving The American Responders — during COVID to serve the needs of and make homeownership a little easier for first responders. In addition to health professionals, other eligible borrowers include teachers, firefighters, police officers, and those with specific certifications.

“It was our way to say, ‘thank you,’ and offer these members a helpful product,” Gaddie says.

And with major hubs for large hospitals like Kalamazoo, Grand Rapids, and St. Joseph in the credit union’s backyard, offering a mortgage for physicians that maxes out at $1.5 million also made sense.

“This is a pretty common product design in our market,” Gaddie says. “We didn’t want our members to have to go elsewhere.”

For members that live in more rural areas, Honor has them covered, too, with a government-backed USDA loan that require no money down and covers a large swath of geographic areas and income levels. These rural development loans are intended for low- to moderate-income borrowers. However, according to Gaddie, “moderate” income in some areas includes up to $121,000 annually for a family of five or up to $91,000 for a single or couple. And as home builders often build in areas that qualify for rural development yet are located only 10- or 15-minutes from a populated city, families who qualify have an avenue to buy a new home without forgoing the benefits of city living.

“It’s a national program, and it’s not limited to just low-income borrowers,” Gaddie says. “Much of your membership can likely qualify for a rural development or USDA loan. Identifying renters in those areas and generating awareness in your community is a great way to encourage homeownership.”

Partnerships For Success

According to Gaddie, government-backed loans aren’t necessarily complicated but they do require specialized training and might seem overwhelming to get up and running. That’s why she advises other credit unions, especially smaller institutions, to partner, partner, partner.

“You don’t have to run these programs by yourself,” Gaddie says. “We have those skillsets at Honor, but there are many CUSOs that offer FHA and rural development loans. Offering these products is a beautiful way to help your members and create an income source for the credit union.”

For Gaddie, whose mother never owned a home, combating the racial homeownership gap is personal.

“Making sure our program is diverse and accessible to a large range of people matters,” she says.

To ensure mortgage lending remains equitable as Honor grows, the credit union recently launched an auditing initiative with a third party. It analyzes demographic data — including income, gender, ethnicity, and other factors — to gain insights regarding where it should focus in the future and how it can make a greater impact on its community.

“Auditing is a great way to paint a picture of your community and see who you might be missing,” Gaddie says.

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