Minorities are a growing portion of the overall U.S. population and they’re expanding their financial clout at the same time. Mortgage lenders and originators will need to appeal to the minority borrower to grow their business now and into the future.
People of color, and African Americans in particular, will often view businesses with distrust and suspicion. To overcome this, mortgage professionals need to understand what has occurred in the past and make substantial commitments to do better in the future. A slick marketing campaign won’t be enough to attract these prospective borrowers.
News headlines and data from the U.S. Census Bureau have signaled for years that the minority population has grown from what was once an emerging market into one of the greatest opportunities for businesses today. Companies realize that they need to take notice. The piece of the equation they can’t seem to grasp is why this desirable and lucrative market is not embracing their newfound interest to expand more deeply into the community.
The buying power of people of color — or their aggregate annual income after taxes — was $3.9 trillion, according to a 2019 study by the University of Georgia. Of this total, African American buying power was at $1.3 trillion, a 114% increase since 2000.
Meanwhile, the white population in the U.S. decreased from a share of 72.4% in 2010 to 61.6% in 2020, according to census figures. Most minority populations grew during the decade. Notably, the number of people who reported to be more than one race skyrocketed by 276%, going from 9 million people in 2010 to 33.8 million in 2020.
How do mortgage companies appeal to minority communities? These businesses are hampered, like many midsize and large U.S. businesses, with limited minority representation in the workplace, especially at the executive levels.
To offer a clear end-to-end view of the situation, let’s focus on the Black community. That’s not to say that other minority communities (such as Hispanics, Asian Americans, Native Americans and Pacific Islanders) are void of issues related to bias and racism.
The history between the Black community and white businesses over the past several decades has been particularly toxic. The biggest issue is trust.
For decades, from the post-slavery period through the late 1960s and early ‘70s, white businesses had little interest in Black dollars. Black people were refused employment, access and services (most memorably at lunch counters), but also at banks, insurance companies, auto dealerships, medical facilities, restaurants and hotels, etc. In many situations, cases of bias and racism were supported by laws and policies at the federal and state levels.
If Black people could not work at white businesses or even use their services, they had to create their own communities to become self-sustaining and financially independent. This is where things got toxic and became the source of so much distrust.
Many white Americans only recently learned about Black Wall Street — the Greenwood District in Tulsa, Oklahoma, that was one of the most prosperous African American communities in the U.S. In 1921, a white mob destroyed the community, burning down 35 city blocks while killing 300 people and injuring another 800. Much of the discussion is about the lives lost, but consider the financial loss — or more importantly, the loss of potential wealth.
Imagine a bank, an insurance company, an investment company, a grocery store or a restaurant started more than a century ago and continuing to run successfully. It would be easy to see how allowing these businesses to grow over the years could turn into exponential wealth for these families and communities today, and how such wealth would have made it possible for the owners and employees to go to college, start new businesses or create investment trusts for their kids. These African American businesses could easily have grown to become some of the largest companies and retail chains in the U.S. today.
Instead, they were burned to the ground. If you understand this type of financial evolution, you can understand the Black wealth lost today after events like Black Wall Street occurred and successful Black communities were destroyed.
Greenwood wasn’t an isolated incident. The list is long and disheartening: the 1910 massacre in Slocum, Texas; the 1923 massacre in Rosewood, Florida; the destruction of Jackson Ward in Richmond, Virginia, in the 1950s; and the destruction of the Hayti neighborhood in Durham, North Carolina, once known as the Black Capitol of the South, in the 1960s. Not all of these events occurred in the South. Seneca Village was a thriving African American community in New York City until it was cleared out in 1857 to make way for Central Park.
The loss of each of these communities meant the loss of Black businesses. If the same had occurred with white communities and white businesses, the U.S. may never have had Walmart, Target, Kraft Foods or a number of other businesses that are household names today.
One of the most egregious examples of undercutting the future prospects of African Americans occurred with the GI Bill. Black and white solders alike fought and died in World War II while facing the same enemy, bombs and bullets. The GI Bill was signed into law by President Franklin D. Roosevelt to help veterans returning from the war obtain mortgages and pay for college, among other things.
While it helped white Americans prosper and accumulate wealth, Black Americans were systematically denied access to the bill’s benefits. More than 1.2 million Black Americans signed up for World War II. When they returned, they found out that the GI Bill excluded them in a multitude of ways. For the Black soldier with little to no GI Bill access, their lives were directed to more menial jobs, they couldn’t afford homes or pay for college, and they accumulated limited savings.
It’s tempting to say all of this occurred in the past. Unfortunately, there are more recent events. Let’s start with the 2008 subprime mortgage crisis.
Black families were overwhelmingly harmed by the subprime loans pushed by banks and mortgage companies. Whatever wealth had been gained up to that point was largely destroyed along with the loss of homes. Many Black families trusted the products being marketed to them, only to find out too late they had been scammed.
There’s more that’s still occurring today. Many investigative reports document Black families in search of apartments being falsely told that there are no vacancies or being quoted higher prices than those offered to white families.
Another issue in the housing industry today is anecdotal stories of Black families receiving much-lower-than-expected appraisals on their homes when refinancing or opting to sell. To fix this issue, some Black families have removed all photos from their homes. In other cases, they’ve had white friends or family members stage the homes, and have received higher appraisals.
One in three Black homeowners felt they received low appraisals on their homes while one in four attempted to conceal their race from the appraiser, according to a 2021 LendingTree survey of 2,100 consumers.
One of the nation’s favorite pastimes is football. When former NFL players began receiving compensation for concussions sustained during their careers, an initially overlooked clause included race norming in determining whether players would be eligible to receive benefits. The clause created two different standards, one for Black players and one for whites, to assess cognitive impairment and potential compensation. Although this isn’t related to housing, it’s another vivid example of why African Americans distrust the establishment.
This is the perspective that a mortgage originator needs to understand when sitting across the table from a Black person. This is the history that you need to overcome. To do that, you need to build trust through honesty and transparency.
Much of the time, this trust will not be automatic. You should bring your “A” game and be prepared to be asked many questions. The questions may sound basic, but many times they are being asked in order to examine your personality and mannerisms.
Sometimes, African Americans will ask questions to which they already know the answers. They are testing your honesty. You must embrace transparency and find a way to be clear, open and trustworthy. Explanation, action and documentation rather than verbal promises are a must.
For mortgage lenders and brokerages, attempting to extract money from a minority community when you can’t show proof that you care about the community will be a challenge. The diverse employment of a company (or lack thereof) is a strong indication of the communities it truly cares about when attempting to create generational wealth and thriving families — especially when companies operate in highly diverse areas and still have limited or no diversity.
Black people and other minorities simply want to do business fairly without sneaky tricks, scams and unfair practices. Because of all that has occurred in the past and the mistrust built over time, African Americans and other minorities may not be the easiest people to sell to.
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The question now is whether you and your company will make changes that truly support minority communities at all levels versus what has been occurring for decades. The time is now to pledge to do better through actions, and not just by creating marketing campaigns and meaningless website postings of support. ●