Just 0.64 percent of all home-purchase loans went to borrowers with credit scores below 600 this past October, according to Ellie Mae. Some 20 percent of consumers, however, had
FICO credit scores below 600 in April 2017, according to
the Fair Isaac Corp.
Of course, not all of these consumers are in a position to buy a home, but it’s clear that a fair amount of
them could become homeowners — if they knew that
getting a mortgage was within their reach. Working
with individuals who have low credit scores means first
making them aware they actually have the potential to
secure a home loan.
Marketing to this underserved niche is important
and ripe with opportunity. One of the best ways to
reach new clients in this segment is to work in tandem
with Realtor partners.
Bring the business
Mortgage originators and real estate agents are two
critical components of the homebuying process. All
too often, however, they don’t work together as much,
or as well, as they should. When networking with new
or established Realtor partners, originators should
make sure they’re contributing to relationship building
— not just benefitting from the great mortgage leads
agents may provide.
By providing information about new and largely untapped markets, originators can help their agent partners build their business. Originators should pursue
relationships with Realtors who are already working
in markets that encompass the underserved: first-time
homebuyers, or homes within a certain price range.
These agents will be particularly receptive to the
knowledge of mortgage products that a good originator can provide on a wide range of credit scores and
Don’t stop there. With the strength of the current
real estate market, some Realtors may shy away from
working with clients who have lower credit scores and
smaller downpayments because they think they have
enough clients with great credit.
This is an opportunity for originators to prove their
strength and educate their Realtor partners about
the programs and products available to this niche,
which can open a whole new avenue for their business. In pursuing this segment, real estate agents
can not only increase their business, but also get a
head start on the competition for what will likely be
a growing market.
There is a significant population of underserved
Know the market
clients who think they are shut out of the market and
thus are sitting on the sidelines waiting to buy a home
until some unknown future “better time.” That time
can be now for agents and originators who are willing
to work with these prospective borrowers and know
what it takes to help them become homeowners.
To educate their real estate partners on this market,
originators must first be up to date on the latest developments, loan products and programs available to
the underserved-homebuyer market. The most widely used and consistent products for borrowers with
lower credit scores and small downpayments typically
come from the Federal Housing Administration (FHA)
and the U.S. Department of Veterans Affairs (VA).
In fact, this past October, FHA loans comprised
20 percent of all loans originated and VA loans made
up 10 percent, according to Ellie Mae. In the same time
frame, the average FICO credit score for FHA purchase
loans was 681, compared to a significantly higher
score of 752 for conventional purchase loans. Working with lenders experienced with these government
loan programs is critical for anyone serving the underserved market.
Even within these loan programs, however, borrowers with lower credit scores can struggle to secure
financing. This past September, just 4. 4 percent of all
closed FHA loans went to borrowers with credit scores
in the 550-599 range, while a miniscule 1.62 percent had
scores in the 500-549 range, making it only 6.02 percent
of FHA borrowers who had scores below 600. Although
the FHA allows for scores down to 500, not all lenders
have opted to follow this guideline, leaving many potential homebuyers unable to find a resource for securing the mortgages they need.
Originators who work with this market segment —
and are working to encourage their real estate agent
partners to join them — should connect with lenders
that offer loans to borrowers with a wide range of credit
Ray Brousseau is president of Carrington Mortgage Services
LLC. He oversees all aspects of Carrington’s lending and
servicing divisions, as well as servicing operations. Under
his leadership, Carrington’s full-service mortgage-lending
business with wholesale, retail and centralized sales and
operations has experienced unprecedented growth and
operational results. Brousseau has nearly 30 years of experience in the mortgage-banking and consumer-finance industry, including more than two dozen years with CitiGroup’s
consumer-finance business. Visit carringtonwholesale.com.
Reach Brousseau at firstname.lastname@example.org.
Venture Out of the Credit Box
Work with Realtor partners to tap the underserved-homebuyer market
By Ray Brousseau
For more articles on underserved-
View these articles and more at
“Reducing Barriers to Homeownership,”
“The New Prime Jumbo,”
Matthe w J. Tomiak,
“Population Shift Should Prompt
a Call to Action,”
Rick Roque and Leo Loomie,
“To Serve and Educate,”
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