What one executive did about the homeownership gap and hiring

October 10, 2023 11:53 AM

Patty Arvielo, co-founder and CEO of New American Funding, is so closely associated with promoting the inclusion of two racial groups that typically lag in homeownership that E! Magazine called her "The Oprah of Hispanic and African American lending"

But Arvielo, who feels honored by the comparison but acknowledges there could be mixed feelings about it, said that it doesn't mean the work ever has or will come easy for her company, particularly now.

Patty Arvielo co-CEO of New American Funding.jpg

In a candid interview, Arvielo shared challenges and achievements that she, her husband and co-founder/CEO, Rick, and company have experienced as they've worked toward more equitable hiring and lending in hopes of building more momentum for change in the industry.

Arvielo not only highlighted hiring strategies she found worked when it came to closing the homeownership gap, but also situations in which she learned from course-correction she received from others.

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What follows are some excerpts from that conversation, edited for clarity.

Many of these center on a common theme, which is that not only would more inclusivity at individual companies help to bring down the complicated barriers to equitable lending, more of an inclusive approach among stakeholders like trade groups and regulators could help too.

How far have long-standing New American programs like the Latino Focus initiative and related mentoring gone toward closing the racial gap in homeownership?

It's such a complex, multifaceted issue when it comes to minority homeownership and the disparities that come along with it because there are different segments of the market. I can speak very well about the Hispanic homeownership gap, because I come from a Latino background and I am a Latina. It started out very naturally, because when you have leaders that are diverse, diverse employees now trust the fact that I understand their background, and I understand their unique needs. So it was an organic process in the beginning.

The mentoring came after we started Latino Focus, and once I started, I could see that there were unique gaps in having role models.

I was challenged by an African American man at a Mortgage Bankers Association's event. I was on stage speaking about Hispanic homeownership and the gentleman was very kind, he stood up and he said, "It's really great all the work you're doing around Hispanic homeownership, but what are you doing around African-American homeownership?" I took that to heart. I thanked him for bringing that to my attention. I went back to the office and I pulled every employee that worked at our company that identified as African American onto a conference call. I'm not African American and I'm not from that culture, so I told them I'm only going to be as good as what I'm able to get you to work with me on. So then we developed the NAF Dream, that's our initiative toward closing the Black homeownership gap.

We were only lending roughly 3 or 4% to African American communities. When African Americans make up roughly 12% of our country's population, that's not good enough. So then that's when Rick and I came up with a goal for our company's lending to be near the country's population demographics. We are now 11% in our African American lending efforts. You can see by just focusing on this, making it an initiative, recruiting to the initiative, and training and uplifting African American employees in our organization, our efforts have naturally gone up. That's the approach that we have taken as a company. We're 60% female to male and 43% minority employment now.

The racial homeownership gap is still wider in the broader market. Are there mistakes the industry’s making in staffing that’s contributed to this, and if so, what are they?

Independent mortgage bankers do need to do a better job in outreach, in training these individuals and inviting them into our industry. We work with historically Black colleges and universities. We work with industry nonprofits. I work a lot with housing counseling agencies in attracting talent to want to come work for us.

I believe that the biggest issue comes with the industry's disenfranchised approach. You have many different trade organizations, like the Mortgage Bankers Association, the National Association of Hispanic Real Estate Professional and the National Association of Real Estate Brokers. Everybody's doing a great job in their lane but unless we all pull together, we're not going to have a big enough voice with the government to really let them know that they need to work hand in hand with us to deliver affordable housing and loans to low income borrowers. A lot of my time is spent going to 10 different meetings, talking about the same thing with 10 different entities. It'd be nice to just go to one meeting instead.

I think we do a really great job delivering the loan products but there is a fear in delivering the loan products for the aftermath of the regulators coming in and saying you did it wrong, you have a higher default rate. They don't work hand-in-hand after the loan is funded. They're really good about trying to get us to get the loans delivered, but as soon as they're funded and we're servicing them, the regulators do not understand. Borrowers may have different income and family issues than non-Hispanic or non-African American borrowers. I'll tell you, and I've said this publicly before, I don't blame a lot of independent mortgage banks for not wanting to dive into minority home lending. It comes with a lot of compliance. It comes with a lot of expense and oversight and management of data. It comes with a lot of bills from attorneys to fight wrongful accusations.

How do you address that challenge?

It takes us speaking up. I've spent a lot of my time flying to D.C., doing things like meeting with Sandra Thompson at the Federal Housing Finance Agency, and meeting with Julia Gordon at the Federal Housing Administration. Our stories need to be told. When you have diversity around the table, you then have the voice of the community at the table. So I needed to be at a table with regulators or people making policies around minority homeownership, as an independent mortgage bank as a deliverer of home loans. I always say I don't need new programs, we have really good programs, it's once the borrowers are in the loan is where the missteps are. So, they need diverse stories at the table.

But when you look at our industry as a whole, and I want to say that I've looked at the top 100 independent mortgage banks, there are maybe a handful of us that come from a minority background. The industry is still primarily white and male. There are even very few women. So our voices are not being heard, our challenges are not being seen and our work may go into a downward spiral because they don't have our viewpoint.

Diversity is so important when you're delivering loans, when you're trying to build borrower confidence in your institution. Let's just say you're a regular, independent mortgage bank, and you think you want to compete with New American Funding. So you hire a Latino executive, go out and recruit Latino loan officers. That's only one piece of it, it's got to be in the DNA and the fabric of the organization, it has to start at the top.

Just look at the top 100 independent mortgage banks in the United States of America. I think I'm the only one who founded my company. There are some women who are CEOs and presidents, but they're not founders. There's just so few. When that catches up to the demographics, and the needs of the consumer, then we will start to build trust in institutions so more consumers feel trust that they're being seen as who they are and respected as who they are.

What’s been your biggest challenge when it comes to diverse staffing in the current market?

I think if you interview any mortgage banker in the United States of America, not one of us set out to be one. Every single person I've ever spoken to in this industry fell into this industry. So I think it's a lack of awareness of how to even get into being a mortgage banker. That's why I do a lot of work at the college level. I talk about the opportunities that exist in this industry, but this isn't a good time. I'm very used to the ebb and flows. There is a lot of opportunity in mortgages when the markets are good. There are fewer opportunities now.

Have recent developments like programs at government-related entities aimed at more equitable lending had an impact on the industry’s staffing?

They haven't made me change staffing. I continue to try to promote from within, and really nurture multicultural backgrounds, getting them to rise in our company, because I think it's diversity in the C-suite that will really start to attract diverse employees to an organization. I've looked at peer company leadership and there are so very few Latinos and African Americans in the C-suite at the top 20 independent mortgage bankers.

Do you think high rates are compounding challenges caused by a lack of diversity in staffing when it comes to efforts to narrow the homeownership gap?

I think higher interest rates and the lack of affordable housing are creating an additional barrier to entry. The affordability factor is really taking a toll, so I think we were doing a lot of great work in the past when interest rates were lower, and I bet you this year, when the data comes out, we will see that homeownership has fallen. That doesn't mean that this desire has fallen but I think that barriers to entry from higher interest rates have definitely been an issue.

Do you think the diversity of staffing will get worse? Will it plateau? Is there any way it could improve?

I'm very hopeful it's improving. NAHREP used to have very few industry partners. Very few independent mortgage bankers would actually write the checks and sponsor NAHREP. Now, I would say every single top 20 lender is a sponsor. I feel like the American psyche set the tone for competition in this space and healthy competition is always good, especially in an underserved market. I think we were a leader in serving this market and I think people have followed our lead. African American lending is very different from Hispanic lending but I also feel like we're making progress there. The more awareness we bring to the opportunities that exist in this industry, the better.

The government-related agencies are pushing for more initiatives in this area but at the same time some people are concerned about the court environment and the recent affirmative action ruling. Do you have a thought as to how to navigate that?

Every independent mortgage banker lending to the underserved, low-mod market has to protect their entity, monitor data, and have a very, very, tight compliance and legal department. All of that comes with costs. That results can result in a fear of serving this market because maybe you don't have the resources that major lenders have. That's just a shame, because the loans become much more expensive to underwrite and they become much more expensive to service.

Often agencies or regulators might understand one piece of the pie, but they don't have a view of the whole pie and it makes me defensive. Allegations can come from a government entity or regulator not understanding what it is that we actually do. They don't understand pricing. They don't understand pricing exceptions. They don't understand how we pay loan officer compensation. So you have to armor up with attorneys and you've got to go explain to them.

There are people that do it wrong purposefully. So when you're trying to do it right, I think there should be more of a partnership approach. I think it would be much better because I think everybody wants the same thing. If the government could partner more with players in the industry, I feel like we could do a lot of phenomenal work around closing that homeownership gap.

Have you been able to make any headway in those conversations with the regulators about lending and servicing underserved borrowers?

We haven't had that many issues with servicing. We're super high-touch. We own our own servicing as well. We use very little automation. I feel like when a regulator shows up at our company, they see that we have diversity around origination and servicing and we have really good conversations, but it's amazing to me how little they actually know about what we do.

E! Magazine described your role in Hispanic and African American lending as being as high profile as a celebrity like Oprah Winfrey’s is in television. Do you like the comparison or would you choose a different way to describe the work you’ve done in this area?

I love Oprah. I've seen every one of her shows since I was a young girl growing up in this industry. She's been a very big mentor in my life, so to be compared to her is actually a badge of honor that I value dearly. Whether or not you like Oprah, or even whether you like Patty Arvielo, is your own personal preference.