The Business Case for Why Lenders Are Embracing Diversity
More than one-third of the 13.9 million to 15.9 million new households being created by 2024 will be Hispanic households, and that represents a huge opportunity for the mortgage banking industry, says the Mortgage Bankers Association.
Lenders are already identifying and adapting to meet the needs of this new generation of homebuyers.
“Mortgage banking needs to reflect the changing demographics in America in order to stay current and remain competitive,” says Patty Arvielo, president and co-founder of New American Funding. “We need to ask ourselves, ‘How will the future borrower look?’ and prepare ourselves based on that.”
To underscore the importance of diversity, MBA’s Diversity and Inclusion Committee is chaired every year by the association’s chairman-elect, notes Rodrigo López, executive chairman of NorthMarq Capital Finance LLC, who holds that position.
“We are intentionally engaging the real estate finance industry’s leadership because MBA views diversity and inclusion as a business imperative,” says López.
What the Demographics Show
Borrowers in the future will be substantially different than those from past generations, says Zach Oppenheimer, senior vice president and head of Customer Engagement at Fannie Mae.
He sees four main characteristics defining the majority of future households:
- New household formation will be driven by ethnic and racial minorities.
- Many will be first-time homebuyers.
- They will likely comprise more people.
- They will be more technologically advanced.
“Your homebuyer will no longer be the one-breadwinner family,” agrees Tujuanna Williams, vice president and chief diversity and inclusion officer at Fannie Mae. “Millennials will be generating virtually all future growth, and they are the most racially diverse generation in history.”
“If you don’t have the cultural competency to communicate with these changing demographics, you’re not on the playing field at all,” adds Williams.
Williams oversees diversity efforts at Fannie Mae, which recognizes the importance of attracting and retaining a diverse workforce of its own, and then ensuring that its message of diversity is included in all business activities and lender outreach.
“All levels of the industry have a responsibility to drive inclusion,” she says.
Diversity starts with the products and services that homebuyers are offered. Oppenheimer cites HomeReady™ as one product to help lenders confidently serve these new, more diverse households in a sustainable manner. He says that HomeReady was developed to meet the needs of households with extended family members by allowing a borrower to include household income from a non-borrower who is a member of their household as a compensating factor in qualifying for a loan.
In addition, he says, Fannie Mae realizes many prospective homebuyers work with trusted advisors, such as real estate agents, HUD-approved counseling agencies, or clergy, and Fannie Mae provides information at its Know Your Options™ and The Home Story™ websites for advisors to share with borrowers.
He adds that customers who want to reach Millennials, many of whom have yet to enter the homebuying process, would benefit by leveraging technology that provides ease and convenience. He cites Quicken Loans’ Rocket Mortgage as a solution that is changing the way data is collected. The site offers mortgage approvals “completely online” in about eight minutes. “It’s just one example of how our lenders are recognizing that the borrowers of today and the future will have different needs, and lenders will benefit by adapting their value proposition,” Oppenheimer says.
Making the Move
Arvielo says lenders need staff who can seamlessly transition between cultures, languages and even approaches from “business-structured to warm-familiar.”
“Building a team with that in mind is paramount because we need to reach out to consumers in a way that resonates with them at an individual level and creates that feeling of trust,” says Arvielo. She mentions that one fundamental Latino value is group unity—that all things being equal, a Latino is likely to choose the lender featuring a Latino contact or offering services convenient to Spanish speakers.
“The lenders that are best at serving diverse markets have multilingual staff and collateral materials that allow them to reach borrowers in their native language, whether it’s Spanish, Russian, or Mandarin,” says Oppenheimer. “They are sensitive to the unique needs of a specific audience.”
Radius Financial Group, a mortgage lender in Norwell, MA, uses its “Next Generation” program to train candidates in diversity from all departments—from operations to sales.
“Over the last five years, we had noticed the changing demographic of the homebuying public, and yet most mortgage bankers were old, white, and male,” says Keith Polaski, principal and COO. “There was lots of rhetoric but not much action, so we decided to do something.” The first class in 2015 included six military veterans, one black and two Hispanic, and they are currently planting the seeds for the next group.
“We wouldn’t be doubling down on our investment if it didn’t work. Homeownership is one of the foundations of the American dream, and it’s one of the reasons immigrants come here so we need to be ready to serve them,” Polaski says. “If you want to reach into communities that are diverse, you need diversity and inclusion in your workforce.”