Diversity in Real Estate is the Majority
Diversity is a massive topic and can carry a lot of emotion. I am personally driven to look at the access side of diversity in the real estate market. Having 3 generation Z kiddos, it really struck me that their generation is projected to become majority non-white by 2026, according to the Census Bureau. The oldest of this progressive, pro-government, high tech, diverse group is turning 24 this year and while they are less likely to be born outside the U.S. they are more likely to be the children of immigrants (22% compared to 12% of Millennials). Even as immigration flow into the U.S. has diminished in recent years, new immigrants will continue to join the ranks of Gen Z in the years to come.
If you want to learn more about diversity in real estate, join us on September 16th via Zoom or in-person, for the next Agent Ignite realtor training. My good friend, renowned Denver Realtor, Keynote Speaker and consultant, Lori Pace, will explore the topic of diversity in real estate. Visit the Agent Ignite Homepage here to register.
Sandra Thompson is Driving Big Changes for Home Ownership – we need to start asking a lot more questions
While President Biden was on the campaign trail, we talked a lot about his focus on housing and the money he wanted dogeared not only for affordable housing but to secure greater access to those who are currently under served. Once in office, we highlighted his swift position changes to the Director of FHFA (Sandra Thompson), Secretary of the U.S. Department of HUD (Marcia L Fudge), and the Director of the CFPB (Rohit Chopra) securing action behind the words.
With Sandra Thompson’s first public statement in her new position, it was undeniable what her priorities were.. “There is a widespread lack of affordable housing and access to credit, especially in communities of color,” Thompson said. “It is FHFA’s duty through our regulated entities to ensure that all Americans have equal access to safe, decent, and affordable housing.” Immediately after taking office she reversed the 50 bp “Adverse Market Fee” which punished people with equity looking to lower their monthly payments. Earlier this month, she rolled out a policy to include positive rental payment history in Fannie Mae’s underwriting, which experts expect will most benefit borrowers of color with limited credit history. A week later, Thompson announced ambitious new housing goals for the regulated entities, significantly increasing their quota of loan purchases from minority and low-income census tracts from 2022 to 2024. Then this week, a new agreement between FHFA and HUD was announced which could heighten scrutiny of whether the government sponsored entities underwriting engines do enough to further fair housing.
This new memo of understanding (MOU) agreement formalizes the sharing of information, resources and investigations of entities between FHFA and HUD. The first aspect they are going after is Fannie Mae’s Desktop Underwriter and Freddie Mac’s Loan Prospector.. their respective automated underwriting systems. Do they have a potential for disparate impact under fair housing law? i.e. Fannie Mae’s loan-level price adjustments and Freddie Mac’s delivery fees, which are meant to offset higher risk for loans to borrowers with lower credit scores and lower down payments, may come under heightened scrutiny. When examined, loans to borrowers of color make up a very small portion of the loans the GSEs (Fannie/Freddie) acquire. Only 3.06% of loans Fannie acquired and 3.8% of loans Freddie acquired were from Black borrowers; while they make up 14% of the population (per census).
Regulators will also use this MOU to share information on the ongoing investigations of mortgage servicers, federally chartered banks, independent mortgage originators (IMOs), real estate companies, appraisers, etc, coordinating the efforts and information sharing between HUD and FHFA. Given the new CFPB’s Director, Rohit Chopra, tough stance on regulation and oversight, I expect to see a lot more headlines discussing redlining and disparate treatment. I was thinking about the simplicity of our actions. Some lenders don’t do down payment assistance “because it’s too time consuming”, other lenders have overlays for higher credit scores required “to offset repurchase risk”, some real estate agents focus solely on the luxury market “because they feel aligned with the client”, and appraisals have been shown to come in with lower values based on the neighborhood “location, location, location”. Is that disparate treatment? Is diversity in real estate lacking? I don’t have the answers…but I know we all have to start asking a lot more questions.
The average credit score to purchase a house in the U.S. during 2019 and 2020 was 717. This has only increased in 2021. Fewer people with under 660 credit score had access to purchase a home in 2021. This had a lot to do with limited supply, heightened demand, and the competitive edge cash and appraisal gaps had over FHA, VA, and down payment assistance buyers.