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Diversity and Inclusion (D&I) is receiving more attention in the business world, as a greater number of companies are increasing their efforts to include women and minorities in their workforce. A recent study, Women in the Workplace, conducted by LeanIn.org and McKinsey & Company reveals disappointing results; it shows that the American corporate world is nowhere near achieving gender equality. The study analyzed 118 companies, 30,000 employees, and reveals that over the past three years, there was only a meager increase of 0.9 percent in the number of C-Suite women; as the report asserts, at this rate it will take women at least 100 years to match men in similar roles, and at least 25 years to match men even in senior vice presidential positions.
The inequality endured by women and minorities can be seen in various segments, from employment to purchasing power. A recent study published by the Journal of Real Estate and Finance Economics reveals that there is a vast difference in the interest rates charged to African-American and white homebuyers. The report assessed the demographic traits and mortgages of over 3,500 households during the housing boom and found that on average, African-American borrowers were charged between 0.29 and 0.31 percentage points more than white borrowers, and African-American women paid the maximum rates among all. This translates to African-American men and women paying thousands of dollars more over the course of their loan than white men and women.
Apart from this disparity in interest rates, there is also a huge difference in the number of Caucasian and minority homebuyers. The 2015 Profile of Home Buyers and Sellers from the National Association of REALTORS (NAR) reports that 85 percent of homebuyers from July 2013 to June 2014 were white, with the remaining 15 percent being divided equally among Hispanics, African-Americans and Asians.
The National Association of Hispanic Real Estate Professionals (NAHREP) affirms that the Hispanic community has a difficult time getting home loans when compared to people from other backgrounds. In their 2014 State of Hispanic Homeownership Report—based on data from the U.S. Census Bureau, Pew Research Center and the Nielsen & Selig Center for Economic Growth—NAHREP states that there has been a drop in the rate of Hispanic homeownership between 2013 and 2014, from 46.1 to 45.4 percent; the numbers were derived from owner households in comparison to the total number of overall households. NAHREP and NAWRB are of the opinion that the homeownership rates in minority communities could improve if there were more policies to increase and promote the credit offered to lower- and middle-income families.
Affordability and strict underwriting standards in the industry are additional contributing factors to the lack of Hispanic homeownership, as well as the scarcity of mortgage officers who can communicate effectively in Spanish with these potential buyers. A noticeable change has been introduced by companies like New American Funding that have opened their doors to the Hispanic community, both by employing and focusing their efforts towards people of Hispanic origin; about half of their employees are minorities and more than half are women. New American Funding, through its university, also offers a Loan Officer Certification program that helps interested individuals start a career in the mortgage industry.
The advantages of increasing D&I in the mortgage and lending industry are numerous and invaluable. D&I promotes equality in the industry, helps people build symbiotic relationships and adds proven bottom line profits. With D&I as part of the core business, it adds value to the local community and promotes greater business relationships especially with entities conducting business with the government.
Diversity and Inclusion
Kickstarting the mortgage industry D&I movement is the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, with its Section 342 which created the Office(s) of Minority and Women Inclusion (OMWI) for regulated entities. Dodd-Frank tasked these offices with “all matters of the agency relating to diversity in management, employment, and business activities.”
The two government-sponsored enterprises (GSEs) at the forefront of D&I are Fannie Mae and Freddie Mac. In the ’90s, Fannie Mae established a program in collaboration with some community colleges to encourage female and minority students to enter the banking and mortgage industries. The program was aimed at preparing students for careers in the mortgage business by providing certificates and degree programs. Community colleges that were part of the program also partnered with local mortgage companies and banks to ensure employment for graduates.
Freddie Mac created CreditSmart Asian which provides a three-part series of guidebooks in Chinese, Korean, Vietnamese and English. These books help the Asian community understand key topics like good credit, the right steps towards buying a home and the benefits of owning a home. Learn more at http://www.freddiemac.com/creditsmart/creditsmart_asian.html.
The U.S. Department of Housing and Urban Development (HUD) released the final ruling on their Affirmatively Furthering Fair Housing (AFFH) Rule in July of this year. Under rule guidelines, communities that receive HUD funding will be trained with tools and data to assist them in fulfilling established fair housing responsibilities. HUD will help in decision-making on fair housing issues and goals to help cultivate affordable housing and stimulate community development.
HUD also has a program specially created for the Native American community. The Indian Home Loan Guarantee Program is “a home mortgage specifically designed for American Indian and Alaska Native families, Alaska Villages, Tribes, or Tribally Designated Housing Entities. Section 184 loans can be used, both on and off native lands, for new construction, rehabilitation, purchase of an existing home, or refinance.” Visit http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/ih/homeownership/184 for more information.
The Federal Deposit Insurance Corporation (FDIC) provides a valuable financial education curriculum for low- and moderate-income groups: Money Smart. This module teaches users the importance of building or repairing credit and banking services. As a member of the Money Smart for Small Business (MSSB) Alliance, NAWRB finds the program useful especially because it is categorized into Money Smart for Adults, Money Smart for Young People, Money Smart for Older Adults and Money Smart for Small Business. Some of these are available in Braille, English, Chinese, Haitian, Creole, Hindi, Hmong, Korean, Russian, Spanish and Vietnamese to cater to different communities. For more information go to www.fdic.gov/moneysmart.
The inclusion of women and minorities has been growing in prevalence but despite the available resources, D&I continues to lack in the mortgage industry. This is made worse by incidents of redlining occurring in several parts of the country. Redlining is the practice whereby banks and mortgage lenders make it extremely difficult for minority communities to get home loans. An article, Biased Lending Evolves, and Blacks Face Trouble Getting Mortgages, in the NY Times reports that in one of the largest redlining settlement cases to date, the Hudson City Savings bank, one of New Jersey’s largest savings banks, recently had to pay $33 million to settle a lawsuit filed by the Consumer Financial Protection Bureau (CFPB) and the Justice Department. The bank was sued because in 2014, out of 1,886 approved mortgage loans only 25 went to African-Americans.
It also mentions a similar situation where last month, the Eagle Bank in Missouri settled a redlining lawsuit with the Justice Department. Exclusionary practices of this nature have a profound and noticeable effect; according to the Federal Reserve Bank, in 2014, African-Americans accounted for 5.2 percent of the country’s total home loans, which was down from 8.7 percent in 2006. Hispanics came in at 7.9 percent that same year, a significant decrease from 11.6 percent in 2007.
Reflecting on Malcolm Forbes’ quote, “Diversity: the art of thinking independently together,” diversity of thought provides the flexibility to challenge the norm and originate the best business solutions. This diversity of thought is best created by a group of diverse individuals, and the former cannot increase until the latter does.
Let’s create a workforce that involves women and minorities at all levels of the hierarchy in order to promote a diverse and talented workforce to lead the country.
View NAWRB magazine here.