Editors Note: This article originally ran in the July issue of MReport, available now. If you would like to nominate yourself or a colleague for September's Women in Housing Issue, click here.
It’s hard to be what you can’t see,” a Harvard Business School student told NPR recently during a class on African-American business leaders and entrepreneurship. With workplace diversity, seeing is indeed believing, but perhaps true success regarding inclusive mortgage business practices will come when believing is seeing.
“We’re starting to understand that we need to match the diversity within our industry to [better] serve the market,” said Dwight Robinson, SVP of Freddie Mac’s Human Resources, Diversity and Inclusion division and its Chief Diversity Officer, who emphasizes that millennials, which last year made up the largest group of first-time homebuyers, are much more diverse than baby boomers.
“By leveraging our differences, we will best serve the needs of an increasingly diverse population,” added Stephanie Roemer, Freddie Mac Director of the Office of Diversity and Inclusion.
In late April, the Consumer Financial Protection Bureau (CFPB) released a report that highlights the business advantages of diversity and best company practices used in the mortgage industry, including getting buy-ins from top leadership, integrating principles of inclusion in recruiting and hiring, and the importance of data in assessing the impact of diversity on keeping organizations competitive. The report was the result of an industry roundtable with mortgage lenders and a collaboration between the CFPB’s Office of Minority and Women Inclusion (OMWI).
A key emphasis among the participants, who ranged from CEOs to OMWI staff from other federal agencies, could be called the mirroring strategy. Mortgage enterprises and industry leaders echoed the concept. A major business challenge is adapting to the changing demographics of the mortgage customer base. This reality underscores that “a diverse and inclusive workforce was especially important to help them attract and retain the talent and perspective they need to solve new and complex problems, create innovative solutions, and improve business outcomes in face of this growing challenge,” according to the CFPB.
“Diversity is a fact, inclusion is a choice,” said Charmaine Brown, Director of Diversity and Inclusion at Fannie Mae. “The question is, ‘How are you using diversity and inclusion to gain a sustained competitive advantage?’”
Building & Tearing Down Walls
The good news in the mortgage world is that diversity offers advantages on both sides of the equation, professional and consumer.
“My inspiration comes from a belief that housing is about more than four walls and a mailbox,” Robinson said. “Housing and the creation of homeowners is a fundamental part of what makes us who we are and what makes our communities strong.”
A more diverse workforce yields stronger performance and innovation. In 2016, minority professionals at Freddie Mac expanded to 51 percent of the company, including an 18.2 to 22.9 percent jump among executives and senior-level officials. A point of pride for Robinson is the “Vendor Academy,” one of Freddie Mac’s newest initiatives and its first corporate-wide push to grow and develop the businesses of minorities, women, the disabled, veterans, and the service-disabled.
Freddie Mac’s Office of Diversity and Inclusion has created select programs to support and develop multicultural women, with 26 at the manager and director levels participating in its first year. Roemer proudly highlights Freddie Mac’s Autism Internship Program, which is designed to match the GSE’s STEM business needs with the unique capabilities of individuals with autism spectrum disorder (ASD). Since its first class of four in May 2012, Freddie Mac has welcomed 17 paid interns into the program, with nine being hired for full-time positions.
“Freddie Mac works with a network of organizations to identify these talented candidates, craft job descriptions for roles to realize their full potential, and train managers to aid the interns with their adjustment to corporate life,” she added.
Like Winning Sports Teams
Fannie Mae, which established its Office of Diversity and Inclusion in 1992, “well before diversity and inclusion became sort of a ‘hot topic,’” Brown added, has launched a “Courageous Conversations” initiative to strong attendance and “overwhelmingly positive” feedback. Developed largely in response to tragedies taking place throughout American cities and communities and directed by Fannie Mae’s Diversity Advisory Council, the program first focused on race using Mellody Hobson’s TED Talk “Color Blind or Color Brave?” Next was a conversation on dispelling myths and stereotypes associated with religion and sexual orientation.
“Understanding that diversity and inclusion is an opportunity and not an obligation” encouraged Brown, who is “super-excited” about the GSE’s focus on STEM and gender equity. The more than 20-year veteran of Fannie Mae finds inspiration not only in her daily mission to nurture and empower the organization’s talent but also in innovative examples outside the mortgage industry. Brown is intrigued by the healthcare providers’ efforts to adapt to the cultural needs of patients and communities, including navigating language barriers, facilitating family, not just patient healing, and expanding waiting rooms.
“I love the quote: ‘People don’t care how much you know, until they know how much you care,” Brown said. “Inclusion is a differentiator that lifts performance, and diverse and inclusive teams achieve greater results. In fact, diversity and inclusion trumps IQ. It’s similar to creating winning sports teams. You need key ingredients to get the best result: having the right coach, the right players in the right position, a strong bench, and a playbook that’s adaptable with multiple options to beat the competition.”
Expanding Trust & Wealth
The mortgage industry should be more active on two fronts related to diversity, says D. Steve Boland, Head of Consumer Lending at Bank of America, who was recently named Vice Chair of the company’s Global Diversity & Inclusion Council. First, it must re-earn the trust of the many diverse millennials who have turned away from the mortgage industry and financial services in the last few years.
“Another issue we face as a nation—and as an industry—is the wealth gap,” said the 27-year mortgage industry pro, who grew up in Florida and Jamaica. “Homeownership is one of the most powerful ways to shrink the wealth gap. Numerous studies indicate that embracing diversity contributes to income growth, job creation and increasing economic development. At the personal level, one of the best rewards of making a career in the mortgage industry is helping families and individuals build wealth.”
Bank of America boasts a U.S. workforce that is more than 40 percent racially and ethnically diverse and a global employee population that is more than 50 percent female, including nearly 40 percent of its global management team.
“We know that diversity and inclusion are about more than numbers and percentages,” Boland says. “We actively foster an inclusive environment where our employees are valued for who they are and what they offer. Diversity is much more meaningful when paired with inclusion.”
Bank of America’s D&I Development Program, a 12-month speaker series offered to nearly 70,000 employee network members and individual company contributors, experienced a 44 percent year-over-year participation increase in diversity and inclusion learning in 2016 with more than 90,000 completions, according to Boland.
“In 2016, we witnessed civil strife, protest, and loss of life in cities around the world,” he added. “These events remind us of the importance of supporting each other—colleagues, clients, and community partners alike—understanding that we are all affected in personal ways, and appreciating that those feelings do not pause when people come to work at the bank or do business with us.”
As a result, Bank of America expanded its “courageous conversations” initiative similar to Fannie Mae’s. In December, the company’s National Community Advisory Council convened for a talk about social justice and racial equality that was broadcast to more than 50,000 employees and featured panelists Cornell Brooks of the NAACP, Wade Henderson of the Leadership Conference on Civil and Human Rights, and the National Urban League’s Marc Morial.
Boland, who during the last 25 years has counseled and coached young adults of diverse backgrounds in their career paths, points to recent studies by McKinsey & Company and Deloitte that have drawn a strong correlation between a company’s financial performance and a balanced focus on diversity and inclusion. The U.S. Census Bureau’s forecast of a “minority-majority” population in the United States in 2050 should motivate the mortgage industry as well.
“Diverse customers will demand new products, come from new market segments, and require different types of services,” he said. “The mortgage industry must prepare for this at all levels, with a special focus on ensuring that our future leaders can meet customers’ needs.”
The Future is Diverse
Sustained growth means offering enduring value through changing business cycles, consumer preferences, and demographics. Keep your eyes on the housing horizon.
“Diversity is critical to the financial services’ industry future,” said Brad Blackwell, EVP and Portfolio Business Manager at Wells Fargo Home Mortgage. “To remain relevant and grow, companies must ensure they are prepared to serve a more diverse customer base.”
The numbers don’t lie. Blackwell reports that there will be 14 billion new households by 2024, the majority of them African-American and Hispanic. However, the homeownership rates for both demographic segments lag behind that of the general population. In fact, at approximately 42 percent, the African-American rate is the lowest, 20 points below the national average.
“For the past six years, Wells Fargo has been the nation’s leading residential mortgage lender to racially and ethnically diverse homebuyers according to the Home Mortgage Disclosure Act, and we are dedicated to advancing homeownership in these communities,” says Jimmie Paschall, EVP and Head of Enterprise Diversity and Inclusion at Wells Fargo.
The dedicated investment dollars don’t lie either. In February, Wells Fargo announced a sizable commitment to help increase African-American homeownership: $60 billion in originations for qualified homebuyers and $15 million dedicated to homebuyer education and counseling. This came after a similar program in 2015 in support of the National Association of Hispanic Real Estate Professionals®’ (NAHREP) Hispanic Wealth Project.
A highlight of Wells Fargo’s April Corporate Social Responsibility progress report was the noting of a nearly $67 billion investment in lending capital and grants in diverse small business, sustainable housing, clean technology, and other critical community needs. The 2020 plan is to spend 15 percent of the bank’s procurement dollars with certified diverse suppliers. Last year, Wells Fargo spent $1.1 billion with minority-owned businesses and donated more than $36 million to support the development of women and diverse leaders and more.
Whether a professional team or just the garden-variety spice of life, diversity of thought and skills means increased appeal, preparation, and strength. To Wells Fargo, winner of the Market Outreach Strategies honors last year in the MBA’s inaugural Diversity & Inclusion Leadership Awards, those two principles are critical to understanding customers, seeing new business opportunities, and improving service overall.
“We experienced some of the toughest challenges in our company’s history this past year,” says Paschall. “Our top priority is rebuilding trust, and our commitment to building a culture of diversity and inclusion is more important than ever as we work to build a better bank for the future.”
Diversifying the Portfolio
Open minds and business minds are alike. They both tend to be ready for learning and opportunity, and a business organization open to different viewpoints, approaches, and backgrounds is one prepping for sustained success.
“When we consider the retirement of the baby boomers and look to the succession of the industry, we must ask if we’ve done enough to engage millennial talent,” said Freddie Mac’s Roemer, whose mother is from Ecuador. “If an industry does not look to constantly refresh, it will remain stagnant and fail to thrive. Companies and industries must continue to explore options to enhance and question current rules and systems in the name of increased efficiency and effectiveness.”
Success happens when preparation meets opportunity, the old saying goes. Mortgage industry leaders, like the ones above, are finding that diversity and inclusion fuel both sides.