Diversity In Mortgage Banking Is Good Business

Just putting out a flag to my industry friends in hopes you all can attend the  Diversity and Inclusion Summit this December. FHFA Director Mel Watt will keynote and we will have excellent panels and other outstanding speakers. We need business leaders from the Mortgage Banking Industry, not just the diversity staff members from our industry.

Here is a link to the conference web page: https://www.mba.org/conferences-and-education/event-mini-sites/summit-on-diversity-and-inclusion-2017

This issue is a big one for all of us, especially if we do not address the realities of demographics, income, credit, and savings. It would be great if this became a key event for our industry.

Some interesting items to consider:

1. The impact to minority homeownership rates have three fundamental challenges: wages and unemployment, credit score models average scores compared to whites and underwriting regulations, and savings patterns of minorities and downpayment requirements. These same factors affect access to affordable rental property.

2. As this first link shows, black vs white wage differences are significant. The average difference in 2016 was about $7 per hour per this link ( https://money.cnn.com/2016/09/20/news/economy/black-white-wage-gap/index.html). Obviously wages translate into savings and qualifying power. Higher wages and diversity hiring and employee development are key opportunities here. MBA has established a diversity committee and an annual diversity conference that most lenders unfortunately do not attend. This is where leadership can help. 

3. As this second link reflects black borrowers average (fico) credit score is 677 vs 701 for whites and over 720 for asians ( https://www.valuepenguin.com/average-credit-score). Below a 620 score it gets harder to get any loan approved at market rates. The real estate community and housing stakeholders need to start talking about this. 

4. This 3rd link ( https://www.kirwaninstitute.osu.edu/reports/2010/02_2010_MortgageCrisisImplications_Immergluck.pdf) shows how regulation post recession and tighter credit standards are impacting minorities far more than whites which is reflected in the homeownership rates. Discussing CFPB rules, compensating factors in QM, counseling and more can perhaps be meaningful here. 

5. Finally the net worth of whites on average is $100k more than blacks. Looking at responsible loan products that allow and support sustainable low and no downpayment loans is critical to advancing into minority markets. See this link ( https://www.washingtonpost.com/news/get-there/wp/2015/02/18/the-racial-wealth-gap-we-hardly-talk-about-what-happens-in-retirement/?utm_term=.a75f6e4da3be). 

These are the kinds of issues that our industry can bring thought leadership to and begin serious work in making changes with regulator support. The reality is that the easiest way to kick start the discussion is to attend the conference and participate.

This is about math. 2/3rds of all new household formations over the next decade will be minority (rental and owned) - a mirror opposite to the pre recession decade. If we do not think about out of the box sustainable products, tools, and programs we will see the industry model the pasts home ownership rates. 

Hope to see a great crowd in December.