MicroMortgage Marketplace Launches in Support of Small-Dollar Home Lending in Underserved Markets

Fahe and the Homeownership Council of America (HCA) announce the launch of the MicroMortgage Marketplace—a pilot demonstration project that will test the ability of small-dollar mortgages to make homeownership possible for low- and middle-income families.

Available initially in Louisville, KY, and Southern Indiana, the MicroMortgage Marketplace’s innovative small-dollar mortgage will reduce fees and costs, simplify loan processing, offer underwriting flexibility, and support the purchase of affordable homes using a mortgage under $100,000.   

Homeownership is an important wealth-building tool and the foundation of economic stability for millions of American families. “Many first-time homebuyers and low- and middle-income families need to purchase low-cost properties to be able to move out of rental housing and into homeownership,” observed Laura Meadows, Fahe’s Executive Vice President of Lending.

“The monthly cost of homeownership is often lower than the monthly cost to rent. But affordable, low-cost properties can be hard to access because of the limited availability of mortgages under $100,000.”

Traditional lenders don’t originate many small-dollar mortgages which, according to research from the Urban Institute, leads to a disproportionate number of low-cost properties being purchased without a mortgage. This puts investors and cash-buyers at a competitive advantage when competing with homebuyers to purchase affordable homes in low-cost markets.

Urban research also suggests that small-dollar mortgages will help narrow the persistent racial homeownership and wealth gaps. There are a significant number of homes available under $100,000 in low-cost markets, many that also include sizeable Black renter populations. By expanding access to small-dollar mortgages more people of color gain access to affordable and sustainable homeownership. 

The MicroMortgage Marketplace was co-designed by Fahe and HCA, with the Urban Institute serving as the research partner. A grant from the Access Ventures Reconstruct Challenge, which aims to “decrease costs or increase wealth for the housing insecure population,” funded this pilot demonstration project. 

In particular, the area National Association of Real Estate Brokers (NAREB) quickly embraced this opportunity for Louisville, where they are working to help neighborhood renters transition to homeownership and build wealth. Gabe del Rio, president of HCA, praised the NAREB agents who “have been very helpful to our team during the launch, providing us with insights into property conditions and availability at the target price point, and confirming that the full housing payment for ownership is often hundreds of dollars less per month than renting a similar home.”

In this pilot demonstration project, MicroMortgages are underwritten, funded and serviced by Fahe, a nonprofit mortgage lender. Fahe provides the licensing and lending operations, accepting loans brokered by local nonprofits. If the MicroMortgage Marketplace is successful in expanding homeownership opportunities, it could become more widely available as a product offered by other community development financial institutions (CDFIs), housing authorities, and local banks.

“Small-dollar mortgages could have positive long-term effects on households and communities,” notes Alanna McCargo, vice president for housing finance policy at the Urban Institute. “This MicroMortgage Marketplace pilot demonstration may help us better understand how to provide affordable access to homeownership financing, which can alleviate the burden of unstable, expensive rental housing and help create wealth for families through homeownership and equity building. Many households begin the journey to economic mobility through homeownership, and families of color in particular benefit if access to financing is more readily available to transition from renting to owning at a much lower monthly cost. We need a more robust MicroMortgage market to meet this need. This is a first step to helping us get there.”

CONTACT: Gabe del Rio, (949) 258-8475 x700, gdr@homeownershipcouncil.org  

Source: Homeownership Council of America