Racial equity in the mortgage biz goes beyond “fancy galas”

Panel of experts outlined proactive steps lenders can take before lawmakers force the issue

HW+ expanding homeonership

If last year gave rise to a slew of announcements of initiatives to address issues of racial equity, now is the time to give force to those promises.

Laura Brandao, president and partner of American Financial Resources, Tai Christensen, director of government affairs and chief diversity and inclusion officer at CBC Mortgage Agency and Montell Watson, director of corporate strategy at Movement Mortgage, took the stage at HousingWire Annual in Frisco, Texas to offer some “practical tips” for mortgage lenders to narrow the racial homeownership gap.

Lenders can start by hiring from a more diverse pool of talent. Christensen and Watson also advised against seeing racial equity as only a cause to donate money to, instead of enacting meaningful change in hiring and business practices.

“If you’re just donating dollars you’re not really doing anything,” said Christensen. “What are you doing to work toward equity? The time of the fancy galas and fundraisers is over.”

Helping to rebuild the relationship with communities that had their equity wiped out in the Great Recession won’t be easy. “There’s a lot of trauma for people of color from being told no for so long,” Watson said.

Whether or not lenders act proactively, lawmakers in Washington, D.C., are clearly giving the issue some thought. Mortgage lenders may not like what they come up with.

Christensen said that two major proposals to assist borrowers of color have emerged, although there are some ongoing “heated discussions” in D.C. over the details.

The first piece of legislation, backed by California Democratic Congresswoman Maxine Waters, would provide a tax credit to first-time, first-generation borrowers for down payment assistance. But determining who qualifies as a first-generation borrower could be a challenge for underwriting, Christensen said.

The other proposal on the table, which Pennsylvania Democratic Sen. Mark Warner unveiled last week, would create a program to sponsor low fixed-rate 20-year mortgages. With the help of the Department of the Treasury, Ginnie Mae would subsidize the interest rate and origination fees to reduce the payments to the level of a 30-year mortgage. In effect, borrowers would build equity at twice the rate of a conventional 30-year mortgage.

The Warner bill has its deficiencies as well, panelists said. Christensen noted there are concerns that the program would not be sufficiently targeted.

“The fear is that caucasian communities that already have access to down payment assistance would maybe also be interested in building their equity faster,” Christensen said.

While legislators dream of solving the racial homeownership gap themselves, changes implemented by the government-sponsored enterprises and the Department of Housing and Urban Development do not need their blessing.

Already this year, Fannie Mae has started including positive rental history in its automated underwriting system — a help for communities that have less established credit, or a strong distrust of financial institutions.

The Federal Housing Administration also, in June, changed its calculations for borrowers with student loans to make it easier for them to qualify for mortgage loans.

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