In The News This Week - "Expert Opinion"
by Tracy Castelli for Office.com
Office.com recently spoke with Michael R. Brown ... about the rise of minority borrowers ...
Q. With the rapid growth of minorities searching for loans, how can the industry keep up?
A. In a phrase: short-term, proactive advocacy; long-term, proactive education. Many minority customers accept loan programs recommended by their loan agent (who functions for many of them as a trusted guide in an alien field) that are completely inappropriate for them, such as balloons, or high-margin ARMs with long prepayment penalties, or a string of cash-out refinances used to finance inappropriate spending.
On the individual level, we must not regard a borrower as an opportunity to close a sale but as a fellow human being whose life will be affected for years afterwards by the loan we are arranging on their behalf. We must probe deeper into their situation than the loan application, particularly with the minority applicant. Does the customer feel comfortable with the loan process, or does it feel intimidating or mysterious or invasive? Is the customer living fiscally prudently, or have they fallen into impecunious extravagance? Is there any education I can provide that will help the customer's financial position or experience with the loan process? Long-term, the mortgage industry - and the financial industry in general - need to devote themselves to outreach programs to the minority communities they hope to serve.
The financial industry should underwrite educational outreaches to minority persons both young and old that compassionately assist them in becoming financially savvy and prudent. This is a purely win-win pursuit: Borrowers who conduct themselves prudently are better candidates for quality loans, and the financial industry will win deserved respect and customer loyalty in communities that have often needed the most care and received the least.
Q. How do you market to this segment without alienating them?
A. My experience with minority customers suggests that they become alienated for the same reason as any other person: They feel that they are being treated as less than they should be. I think that the loan agent must be especially sensitive to the future financial prospects of the minority customer. Many minority people work long hours at multiple jobs in manufacturing and service sectors. They tend to be extraordinarily devoted to their family, and will not hesitate to put all their resources to aid a family member in need. It is our responsibility to supply loan products, pricing, and education that helps them attain as solid a financial footing as possible (particularly in amassing savings), so that their lives can be as productive and upward-rising as possible.
Specific steps to market to minority customers include educational outreach, value-added services (such as arranging discount financial-counseling in partnership with a financial advisor or Consumer Credit Counseling), and offering transitional products between prime and sub-prime with improved pricing and terms that will help borrowers achieve stable cash flow, progressive pay-down of principal, good debt management, good credit records and scorings, and an improvement in quality of life.
- http://www.office.com/global/0,2724,64-1324,FF.html (link now defunct)