The rise of independent lending provides an excellent window into underserved real estate demographics.
The Great Recession of 2008 has left its fingerprints on the economy and housing market even over a decade later. As events become increasingly tumultuous in the public arena, consumers have grown rightly concerned about the welfare of their economic futures.
In the wake of the recession and subsequent economic upheaval occurring at intervals, the public has turned a wary eye toward big banks and traditional lenders. At the same time, many of these organizations have taken a step back from the housing market due to wariness of their own.
Without something to fill the space left by these entities, many demographics of potential homeowners would be left without the resources to pursue their dreams and engage in the vitality of the housing market. Independent mortgage banks have filled this void in large numbers over the past year.
The rising involvement of independent mortgage banks in housing market transactions is evidence of a shift in perception and demand toward a preference for such services. Paying attention to this shift will serve you well as an agent, offering yet another way to keep your finger on the pulse.
There are many demographics with whom you will work who would not have access to mortgage credit without these independent institutions. The rise in IMB participation in the housing market highlights the needs and characteristics of these demographics.
For one thing, minority households, service members, and veterans who find themselves in suboptimal financial situations very often rely on independent lenders for mortgage credit. These sections of the population represent people for whom the dream of owning a home is very prevalent for a variety of reasons.
It is important to recognize where your clients may be coming from and to employ at least a surface understanding of their personal and demographic histories. People in these social strata are often very invested in making the positive life change represented by purchasing a home.
As an agent, you can steer them in the right direction when they are looking to buy, but only if you make an effort to understand the circumstances that led them to you.
First-time buyers and low- to moderate-income buyers are another group that stand to benefit from choosing an independent lender. These groups can especially benefit from your counsel as they make the move toward purchasing their first or upgraded home.
Risks and rewards
The majority of minority and low- to moderate-income buyers in 2017 secured financing from independent mortgage banks.
These organizations are represented across a variety of economic sectors, and are often privately held and very personally invested in responsible lending and business management. They do not have the associations that often alarm wary consumers.
In fact, the word “private” can be a sign of relief for many consumers who are weary of the volatility of the public sphere. However, even these independent lenders are closely regulated, meaning that there is security in opting for them.
These lenders increase competition in the market and provide wary or underserved clients with an alternative to the traditional lending process. And their prevalence in recent years can be a point of education for the agents who serve those clients.