Diverse households account for trillions in purchase opportunity in the next five years—and failing to adapt may lead to costly penalties.
Recently, the U.S. Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB) has taken a strong stance on redlining, taking legal action yet again. As of October 15, Fairway Independent Mortgage Corporation (Fairway) is to pay a $1.9 million penalty and provide $7 million in loan subsidies as part of its settlement. Though a drop in the bucket for Fairway, the settlement underscores the critical importance of diverse lending initiatives.
Unintentional Redlining Costs
Many credit unions may be at risk of redlining, completely unintentionally. As a result of outdated or under-evaluated lending strategies, redlining suits indicate a credit union’s failure to serve its entire community. One way unintentional redlining may occur is due to historic decisions made regarding branch location resulting in branches placed only in predominantly white areas. Another example might be advertising primarily in affluent neighborhoods, thereby neglecting to serve lower-income areas.
Even with no malice behind the decision, redlining comes at a cost—and not just financially. Credit unions practicing redlining, intentional or not, will lose out on enormous business opportunities. According to iEmergent’s U.S. Total Mortgage Volume Forecast, multicultural households will account for about $2.2 trillion in purchase dollars over the next five years.
Seize Opportunity
It is imperative that lenders adapt antiquated strategies to the modern era to account for the changing face of America’s homebuyers, lest they miss out. By finding trusted community partners, creating internal alignment, and using data to inform targeted lending strategies in areas of high opportunity, credit unions can ensure they are serving their entire community.
Learn more about how data can inform effective lending strategies in the modern market in the full article, originally published by HousingWire: https://www.iemergent.com/insights/redlining-housingwire