The online mortgage market deploys computing power to combat lending bias

Miami’s Evan Leaphart is the founder of Kiddie Kredit, an app that helps kids understand credit scores and financial responsibility through chores. But when it came to buying her own home this year, Leaphart felt lost.

“It’s not that I haven’t tried it before, but my credit rating got in my way,” Leaphart, 36, said. So the CEO turned to another online financial education tool.

“If it hadn’t been for Home Lending Pal, I wouldn’t have known where to start,” he said.

Co-founded by Orlando entrepreneur Bryan Young, Home Lending Pal is an online marketplace that guides customers through the process of getting a mortgage, preparing paperwork, and improving mortgage scores. credit to the application of assistance programs and ultimately to the purchase of a home.

Launched in 2017, Home Lending Pal was created for Millennials and Generation Z who prefer to do all their banking online. The company uses artificial intelligence to match people’s financial profiles with lenders and loan assistance programs that suit their goals.

“Make sure all your documents are lined up, that really helped,” Leaphart said. “It walked me through a process of understanding what it would mean to be owner ready.”

But Young, who is black, and co-founder Steve Better, who is Latino, soon discovered they were doing something for another market.

“We kind of tripped over the fact that it was helping minorities,” Young, 36, said.

When people apply for mortgages through Home Lending Pal, the company removes age, gender and race from the application process, instead using AI to match users with loan programs based solely on financial criteria. Young says this helps eliminate bias in the loan process.

A study by the Urban Institute, a Washington-based think tank, indicates that people of color are more likely to be turned down than white applicants, even when other factors are taken into account.

Latinos, for example, were 40% more likely to be turned down, and for African Americans it was as high as 80%.

Another Urban Institute study showed a 6% gap between white and black homeowners with mortgages, even in the same credit score brackets.

“We really wanted to level the playing field,” Young said. “Our thesis is that the only thing you should be measured on is your financial and credit information.”

In addition to getting paid for the loans it facilitates, Home Lending Pal is paid by lending institutions to do outreach in places like historically black colleges and universities, community organizations, and housing authorities for connect with underserved populations.

Banks must make at least a few loans each year to low-income and minority applicants to meet federal requirements under the Community Reinvestment Act of 1977.

Young’s mother, Dorine, was an inspiration to get into financial literacy education. In the midst of the Great Recession housing slump of 2007-2009, she was convinced to take out a subprime loan that ended up in the foreclosure of her home in North Carolina.

“They didn’t care if I could afford the house or not,” she said of the banker who gave her the loan.

Even when Bryan was a child, Dorine would tell him about the importance of maintaining good credit. “The credit is you,” she said. “If you don’t have good credit, it’s like being nobody.”

Young, who moved to Orlando in 2020 to participate in the StarterStudio business accelerator program, divides his time between Florida and the company’s other office in North Carolina. The company currently employs 18 people and Young hopes to increase that number.

With the help of Home Lending Pal, Leaphart was able to secure a $400,000 mortgage for a house in South Florida. Leaphart, who is black, says he is grateful to the company for making mortgages more accessible.

“What Bryan and his team are doing is taking on a major challenge,” he said.

About Mallory Brown

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