New programs emerge to close diversity gap in mortgage industry hiring

By: Brad Finkelstein, National Mortgage News Online
Date: May 27, 2021

Long before the racial justice protests of the past year, ComplianceTech founder Maurice Jourdain-Earl was advocating for a greater diversity in the mortgage industry workforce as a means of increasing the number of homeowners who are people of color.

During a session at the 2014 Mortgage Bankers Association annual convention, he went to the microphone and lamented in stark terms the lack of diversity in the industry.

"Until companies diversify their work forces, they will not penetrate communities of color," he said. "People like to do business with people who look like them."

Things have not changed much in the ensuing years. In fact, Legacy Home Loans CEO Ben Slayton stated that just 3% of today's loan officers are Black.

Advocates have constantly said that lack of diversity along with an aging workforce is likely holding the mortgage industry back when it comes to meeting the needs of millennial households, including people of color, who are looking for financing.

Several efforts have taken root recently to help bridge that gap. Legacy, in conjunction with the Historically Black Colleges and Universities Career Development Marketplace, has hired 14 students to be trained and employed as mortgage loan originators upon the program's completion.

And Axis Lending Academy recently enrolled its first class of 10 students in a free curriculum that trains professionals from other industries on working in the mortgage industry. The San Francisco-based nonprofit, which was founded this year, aims to help mortgage companies increase workforce diversity, which it defines as anyone who is different from the “standard” including age, handicap, sexual orientation and religious beliefs, in addition to race.

While these initial efforts might seem small, they are key steps in bringing in a more diverse population of workers, which supporters also believe will expand homeownership opportunities among underserved groups.

An aging industry looking to attract millennials

The average age for a mortgage loan officer in 2019 was 47 years-old, according to the Stratmor Group; a 2014 Mortgage Bankers Association study placed the average age at 54. Even at that time, many in the industry discussed a need to evolve to meet the needs of a younger population.

HomeFree-USA, a nonprofit dedicated to providing guidance on home financing to the Black community, created its Center for Financial Advancement in part to work with a number of historically Black colleges and universities to bring a younger and more diverse workforce to the mortgage industry.

VantageScore Solutions began a partnership with the CFA in November to increase its own recruitment of young Black professionals. The work with the CFA can be used as a paradigm to increase recruitment among underserved communities, not only at the HBCUs but at all institutions of higher learning, said Phil Bracken, managing director of government and mortgage industry relations at VantageScore.

"And the virtue of the thrust towards striving for homeownership in those segments will become more readily available, especially if we can get more of these really quality students engaged in internships and then to teach and train and mentor and coach about the value of homeownership and just making that the pinnacle of the American dream," said Bracken. "We want to make this a religion not a fad and we're hopeful that so many more entities join in this crusade with us."

VantageScore's latest credit assessment model includes changes that could allow more people, most of whom are from underserved communities to have a credit score.

Right now, VantageScore is waiting to hear from the Federal Housing Finance Agency regarding whether the government-sponsored enterprises would be required to accept these scores. Without GSE support, VantageScore has a minimal market share in the mortgage business.

The company said with VantageScore 4.0, 12.2 million Black and Hispanic consumers would become scoreable, with 2.4 million having a score of 620 or higher. There are 1.6 million Asian Americans and Pacific Islanders who become scoreable, with 1 million over 620; 1 million Native Americans would be scoreable and have a score over 620.

(In an earlier effort to expand the scoreable population, FICO introduced UltraFICO in 2018; the GSEs also do not accept scores generated from this product.)

"So our whole thrust is expanding opportunity in these segments into a broad constituency of America," said Bracken. "This specific social responsibility action step, this partnership and sponsorship with HomeFree-USA and the HBCUs was just a natural alignment for us to make the next step in that process."

Diversification is at the "elementary school" stage

There have been some improvements in recent years towards diversification, but more needs to be done, said HomeFree-USA founder and President Marcia Griffin. While there is more of a commitment today from the industry, these efforts are still at the "elementary school" stage.

"And so this is the time for us to really understand [and] to talk about some solutions for making a change that's going to be long-term," Griffin said. "And that's going to benefit the mortgage industry, just in general, and it goes beyond sales."

There is opportunity among mortgage industry leaders in partnering with HomeFree-USA and other HUD-approved organizations around the country, because they have ties to the customers that the mortgage industry is trying to get.

People relate to those who have a similar background and so increasing diversity among those working in the industry is critical, Griffin said. And it can be as simple as mining talent that these lenders already have working for them.

"From a recruitment standpoint, whether it's in college recruitment or just generally speaking, you need to have people of color recruiting other people of color. That's just going to get you a greater return on your investment," Griffin said.

But keeping these employees long-term is just as important as bringing them in, in the first place.

"Retaining a Gen Z is different from retaining a millennial of color and different from retaining a Gen X," Griffin said. "So we've got to understand those nuances of how to retain them."

The CFA creates a starting point for students at several HBCUs to consider careers in finance, with a broader goal of helping their communities. "And the good thing is, homeownership is one of the greatest ways, if not the greatest way, to build wealth in underserved communities," she said.

And those opportunities go beyond being a loan officer, to holding executive positions.

To do that takes partnerships. "We need the GSE's, the lenders, the nonprofits, all of us coming together to build the core of the next generation of mortgage leaders, not just loan officers, but mortgage lenders," said Griffin, who is on both Freddie Mac's and Fannie Mae's Affordable Housing Advisory Committee. She also works with the Mortgage Bankers Association in addition to lenders and servicers including Ocwen and Rocket.

Early success as first person hired

The Legacy program has had its first hire, Selena Washington, who is now a loan officer, with licenses in Maryland, Virginia and the District of Columbia.

"We pay for the training to get the students to pass their state exam," Legacy's Slayton said. "We pay for their licensing for at least three states to start with, we pay for their sales training, we pair them up with a sales manager that they report to that will work closely with them and help them in the process of becoming successful."

But the ultimate test of the program is to create a consistently successful loan officer. There already has been about 50% fallout from the program, and in the end, Slayton expects just two to make long-term careers in the industry. While the fallout rate seems high, "knowing how difficult the business is to get started in, it's not surprising," he said.

"You get two people out of 14 to actually be successful in something that they have spent a lot of time and effort in trying to get into, but it's well worth it," Slayton said, adding that Legacy will continue the program.

Legacy is looking for people with a sales or marketing degree for its next class in the program.

"In the mortgage business, sales is a hard job by itself, you keep getting consistent rejections, and it takes a real good person to be able to hang in there with those rejections," Slayton said. "But once you learn how to overcome those objections and become a true salesperson, then it becomes easy for you, you won't want to do anything else."

On-line program brings in first 10 students

Axis' first class launched on May 17. It is being taught remotely from its platform location in Tampa, Fla., said Paul Gigliotti, the program's co-founder and chair.

Participants are required to be in school three days a week from 4 p.m. to 7 p.m. Eastern Time. On the other two days of the work week, they have the ability to log into their account online and view video for additional classes.

"The learners do have workshops and quizzes at the end of every day, and they receive a workbook for every module that they go through in our program," Gigliotti added.

Axis used a predictive index profile to winnow down the number of candidates from 800 to the initial 10 participants. It limited the first offering so that it can make sure it is working as planned, although Gigliotti and the others associated with Axis realize that 50% fallout from that group is probable. As time goes on and more faculty is hired, the class size could increase.

Its first program is focusing on the closing function, with the last portion of the term being an internship for 30 days with an Axis affiliate that is a closing fulfillment company. After that ends, they move towards job placement.

"But we are very excited at the prospect and idea of opening up to different segments in the mortgage lending industry, [including] underwriting and lock desk and some of the other positions," Gigliotti said.

The ultimate goal is not just for a more diverse workforce, but to increase opportunities for all underserved markets.

"Axis Lending Academy is going to have the ability, we firmly believe, in not only solving for diversity, equity and inclusion in the workforce, but I also feel that it's going to start to forge diversity, equity and inclusion in homeownership," Gigliotti said.

For example, a learner could be speaking casually with someone at a barbeque about this opportunity. "And in that, they're sharing what they're learning about homeownership and things to do to prepare for it," Gigliotti said. "And what that does is that really drives education at a different level within the community."

Mentoring and sponsorships supporting success

What these programs bring, Griffin said, is the mentoring and sponsorship that participants desire.

"They feel that they need more of that, they need to have somebody that they can talk to," she said. "Now, the interesting thing is, once a Black person starts working at a bank or mortgage company, the mentor or sponsor doesn't have to be Black necessarily, but it has to be somebody who can speak positively, who can guide them and give them some ideas about what to do and when things get hard, these give some suggestions."

At the end of the day, mortgage companies have to decide they want to make the investment to attract these students and others.

"So the people are out there," Slayton declared. "It's just a matter of someone determining that this is worth going after and putting up money that's necessary in order to help people to get started."