FormFree Revolutionizes Mortgage Industry, Bridging The Gap For Minorities

The company is dedicated to democratizing lending through innovative solutions aimed at empowering minority homeownership

When Brent Chandler launched FormFree in 2007, he was on a mission to democratize lending for all people without bias. As a widely recognized mortgage lending and financial services innovator, Chandler spent over two decades at the cutting edge of trading, personal finance, wealth management, and consumer finance.

He created FormFree after his own frustrating homebuying experience fueled an obsession with making loans simpler and safer for everyone. He was juggling two kids in diapers and three loans, and the experience was frustrating. FormFree was born a short time later, and financial inclusivity has been at the forefront of the company’s mission ever since.

“Biases have plagued our industry for some time now,” said Chandler, who is the CEO and founder of FormFree. “We’re delighted to be out in front and leading the charge, but our primary focus is to provide access to the data and apply the intelligence that can help reach those who have been systematically left behind because of their socioeconomic status, race, gender, or racial background. There’s so much we can do to help these underbanked communities, and we can make credit happen.”

FormFree’s Fight Against Home-Buying Discrimination

Studies show that minorities have a much more difficult time getting housing loans.

Armed with a team of devoted professionals at FormFree, the company went to work, putting the power back in the hands of underserved consumers by giving them the ability to control their financial DNA. Through innovative solutions like Passport and RIKI, consumers can enter the credit market with anonymized data, showcasing their Ability to Pay (ATP) and establishing borrowing power.

These groundbreaking practices level the playing field, giving everyone an equal chance at securing a residential mortgage. FormFree helps lenders make inclusive decisions by revealing the user’s true ATP, using its patent-pending Residual Knowledge Income Index (RIKI), an innovative method for evaluating consumer creditworthiness based on residual income analysis.

Addressing Racial Disparities in Mortgage Access

Homeownership still serves as the hallmark of the American dream, but sobering statistics even in the modern day reveal a stark reality: minorities face significant hurdles in securing residential mortgages.

According to recent research conducted by leading housing advocacy groups, including the Urban Institute and the National Fair Housing Alliance, minorities consistently encounter barriers when seeking housing loans. These barriers manifest in various forms, including discriminatory lending practices, biased algorithms, and disparities in access to financial resources. The racial homeownership gap is widening as banks face tougher capital requirements, which make mortgages unaffordable for those who are cash-strapped.

Even more troubling is that despite having similar financial profiles as their white counterparts, minorities face higher rejection rates and are often steered towards predatory lending products. These systemic inequalities perpetuate cycles of poverty and exacerbate wealth disparities within minority communities.

According to Urban Institute, the gap between White and Black homeownership rates is wider now than it was in 1960, when housing discrimination was rampant and legal. In 2022, 74.6% of White households owned their homes, compared with 45.3% of Black households — a gap of more than 29 points. In 1960, the White homeownership rate was 65%, and the Black rate was 38%, a 27-point gap.

The days of legally sanctioned race-based housing discrimination may be behind us, but redlining still persists in many places around the country. Redlining refers to the discriminatory practice of denying or limiting financial services, such as loans or insurance, to residents of specific neighborhoods based on their racial or ethnic composition. The term originated from marking these neighborhoods on maps with red lines to indicate them as high-risk areas for investment.

While redlining is now illegal under the Fair Housing Act and the Equal Credit Opportunity Act, its legacy persists in many communities, as evidenced by ongoing disparities in access to credit and homeownership. Efforts to address redlining’s effects include community reinvestment initiatives, advocacy for fair lending practices, and policies promoting equitable access to financial services for all residents.

Tackling Systemic Barriers: FormFree’s Role in Closing the Housing Racial Gap

Recognizing the urgent need for change, FormFree has developed groundbreaking solutions to address the root causes of housing discrimination. One example is Guild’s Complete Rate program, powered by FormFree, which offers an alternative method to measure credit risk for borrowers.

Those with no credit score or credit history can opt-in to the program for a free assessment. If the borrowers’ RIKI report from FormFree shows a consistent rent payment history and good residual income history, the borrowers may qualify to receive a lower interest rate, lower fees, or both.

Most mortgage lenders use a borrower’s credit score to determine the interest rate or fees a borrower would pay. Borrowers who do not have a credit score are typically charged higher costs, a higher interest rate, or both. A borrower with no credit score could pay an interest rate of a full percentage point or more over a comparable borrower with a good credit score. FormFree levels the playing field for all borrowers by providing lenders with another tool for evaluating a borrower’s ability to pay.

According to the Consumer Financial Protection Bureau’s (CFPB) “Data Point: Credit Invisibles” report, 19% of adults in the United States lack a traditional credit score. Among them, 8% possess a “thin or stale” credit file, rendering it impossible to generate a current, valid credit score. Meanwhile, 11% are classified as ‘credit invisible’ as they lack a credit file with any of the three major credit bureaus – Equifax, Experian, and TransUnion.

Furthermore, the CFPB findings highlight disparities based on race and ethnicity. Black or Hispanic individuals are more likely than their white or Asian counterparts to be credit invisible or to possess unscored credit records. Approximately 15% of Black and Hispanic individuals fall into the credit invisible category, compared to 9% of white and Asian individuals. Additionally, 13% of Black and 12% of Hispanic individuals have unscored records, in contrast to 7% of white individuals.

FormFree provides the rental payment history, residual income analysis, and other data points as an alternative method of measuring default risk for borrowers with no credit score. FormFree’s proprietary analysis of bank transactions and balance history relies on bank data retrieved directly from financial institutions with consumers’ explicit consent.

FormFree’s Vision for the Future: Equitable Homeownership for All

Recently, FormFree was honored as a HousingWire Tech100 Mortgage award winner for a tenth year for the launch of RIKI, an innovative method for measuring consumers’ Ability to Pay for mortgages based on cash-flow analysis. RIKI offers lenders a more complete understanding of a loan applicant’s borrowing capacity than traditional credit scores alone, making it possible for lenders to evaluate default risk more accurately and extend financing to homebuyers with little to no credit history.

By downloading FormFree’s Passport Wallet® app, consumers can view their real-time Ability to Pay, including their RIKI, and connect with mortgage lenders.

While traditional credit scoring is a valuable resource, FormFree aims to empower lenders to provide financing to underserved markets by giving companies valuable information about a person applying for a loan beyond just their traditional credit score. The company does this by supplementing credit history with granular details about a borrower’s monthly income and expenditures.

FormFree is committed to democratizing lending for all, regardless of demographics or lack of credit history, by equipping lenders with innovative cash-flow underwriting solutions that put borrowers in control of their own financial futures. FormFree is reshaping the lending industry’s landscape through innovative solutions and unwavering dedication and strives to ensure that every individual, regardless of race or ethnicity, has equal access to the benefits of homeownership.

By addressing the systemic barriers that have long plagued minority communities, FormFree is not only closing the housing racial gap but also paving the way for a more just and equitable society.

“We are really aiming to solve problems,” Chandler emphasized. “We must develop solutions that help people and use our skills and voices to create change. We have a real sense of advocacy for helping people – including the lenders and consumers – and we are better together. We want to help Americans get into homes who aren’t in one today.”

About FormFree®

FormFree helps lenders understand credit risk like never before with its patented Passport® product, which opens doors to more