Online mortgage marketplace deploys computer power to fight lending bias

Evan Leaphart of Miami 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 his own house this year, Leaphart felt lost.

“It’s not that I hadn’t tried before, but my credit score got in the way,” said Leaphart, 36. So the CEO turned to a different online financial education tool.

“If it wasn’t 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 walks customers through the process of getting a mortgage, from preparing documents and improving credit scores to applying for assistance programs and ultimately buying a house.

Launched in 2017, Home Lending Pal was created for Millennials and Gen 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 are right for their goals.

“Making sure you have all your documents in a row, it really helped with that,” Leaphart said. “It guided me down a process to understand what it would mean to be homeowner-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 stumbled on the fact that it was helping minorities,” said Young, 36.

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

A study from the Urban Institute, a Washington-based think tank, says that people of color are more likely to have their applications denied than white applicants, even when other factors are accounted for.

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

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

“We wanted to really even 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 such as Historically Black Colleges and Universities, community organizations and housing authorities to connect with underserved populations.

Banks have to give out at least some 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 in getting into financial literacy education. Amid the housing collapse of the Great Recession of 2007-2009, she was convinced to take a subprime loan that ended in foreclosure on her North Carolina home.

“They didn’t care whether I could pay for the house or not,” she said of the banker that gave her the loan.

Even when Bryan was a child, Dorine would talk to him about the importance of maintaining good credit. “Credit is you,” she said. “If you don’t have good credit, that’s like not being anybody.”

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

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

“What Bryan and his team do is tackling a major challenge,” he said.