TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1463706
12 | M R EP O RT COVER STORY ing the largest financial decision of their lifetime? Do they seek familiarity and common ground with the loan officers they are dealing with? Using a database of 30 million profiles, employment-seeking web site Zippia polled demograph- ics and statistics for Mortgage Bankers in the U.S. (verified against the Bureau of Labor Statistics, U.S. Census, and cur- rent job openings), finding that of the more than 50,400 Mortgage Bankers currently employed nationwide, 28.7% of this share are women, while 67.8% are male, with an average overall age of 44 years old. In terms of ethnicity, the most common found ethnic- ity was white (67.5%), followed by Hispanic or Latino (14.6%), and African American (8.7%), while 6% of all Mortgage Bankers identified as LGBTQ+. MReport assembled a panel of industry experts to weigh in on the topic of diversity and inclu- sion in the marketplace, sharing their insight on the topic, from across the mortgage landscape. Recent numbers show the Black homeownership rate in the United States stands at around 43.4%, which is only slightly better than it was in 1970, and nearly 30 percent- age points behind the white homeownership rate of 72.1%. Why is that gap still here, more than 50 years after the Fair Housing Act? Tai Christensen, Director, Chief Diversity & Inclusion Officer, CBC Mortgage Agency // One reason the gap persists is that minority families, on average, have just a fraction of the household wealth that white households do. Minorities who are looking to buy their first home simply don't have the same resources other buyers do. Asking your parents for $20,000 for a down payment, for many, is ludicrous, because your parents don't have that kind of money on hand. But perhaps the biggest cause is that many people in the minority community have learned not to trust lenders. There's a long histo- ry of financial services companies targeting the minority community and putting people in homes they cannot afford, followed by these homes being foreclosed. If you have a grandmother or an uncle who bought a house and lost it, why should you? This financial trauma has been transferred from one generation to the next, and it's not going to be easy to fix. David Abelyen, Founder and CEO, Cake Mortgage // There are several reasons why we're not seeing more Black homeowners. Generally speaking, people of color have a lower credit profile than white borrowers, and when you're selling loan products to people with imperfect credit, the liability falls on you as a lender. So, most lenders just stay away from these products. It's just too much of a risk. Another reason that gap persists is that our industry still struggles with diversity. Look at the C-suites of big companies: they're still mostly white men. If you're try to help people in the minority community become homeowners, your company— and specifically, your leadership team—needs to reflect that goal. Finally, minority borrow- ers who do happen to become homeowners often pay much more than their white coun- terparts. A lot of lenders that serve lower-credit borrowers jack up their fees, rates, and points because they know these people have fewer options. So, even if you do get to the point where you can afford to get your first house, you're being taken to the cleaners. By the way, the racial disparity is not just with home- ownership. Many Black borrow- ers will get a loan and never refinance, even if it's in their best interest. What efforts are being made to close the racial homeown- ership gap? Christensen // Frankly, not much. Some individual lenders are proactively reaching out to the minority community and offering programs with lower FICO re- quirements that lean more heavily on rental history as a qualifying requirement instead of pure credit scores. Obviously, down payment assistance can help, too. These efforts alone aren't going to close the gap, however. In spite of all the programs and product enhancements and opportunities that have been afforded to minority communities, the needle is not moving. In fact, the homeownership gap is growing. Right now, there isn't enough being done either in the public or private sector to advance homeownership in the minority community. What I think is lost in the discussion is that by the year 2040, the majority of U.S. residents are going to be minorities. Unless we as an industry change course, we're simply going to run out of customers. What obstacles do minority borrowers face in the market right now? Christensen // One of the most obvious is housing prices. The average U.S. home price now is nearly $400,000, which simply isn't affordable for most minority families. At that price, you'll need to earn at least $100,000 a year to qualify, even with a low DTI ratio. Right now, only one-fifth of Black Americans make $100,000 annually, so most are priced out of the market before they've even had a chance. What should the industry be doing to address these issues? Christensen // Probably the most important is education. In order to do better, you have to know better. Frankly, I'm embar- rassed at how little housing educa- tion Americans receive, especially in the minority community. All of our down payment assistance (DPA) programs are second loans that are coupled with housing "Generally speaking, people of color have a lower credit profile than white borrowers, and when you're selling loan products to people with imperfect credit, the liability falls on you as a lender. So, most lenders just stay away from these products." —David Abelyen, Founder and CEO, Cake Mortgage