It's great when commenters on a National Mortgage News column piggyback off one another and start a real dialogue. Columnists love this kind of interaction because it means industry professionals who have read the piece were stimulated enough to respond. It so happens that all of these responders thought I was totally wrongheaded. But the interaction is still good.
The column in question pointed out the projected increase in the minority share of the first-time homebuyer market over the next decade at the same time the percentage of minority mortgages has declined, in some cases fairly dramatically (African-Americans, for instance). The conclusion? Unless mortgage lenders want to stay boutique lenders at the current low level of loan volume, they are going to have to lower credit standards to do so.
Didn't get too much agreement on this one. Some of the comments were on the mark; some were funny.
I got a chuckle out of Nathan R's comment, "If minorities make up this large of a percentage why do we call them minorities?"
There isn't a lot to debate here; if their percentage is below 50% — and the projection I quoted was 45% minority share of potential first-time homeowners over the next 10 years — that's the definition of a minority.
But the fact that four of the commenters referred to each other's posts was heartening, even if they all disagreed with the premise of the column. And some of the commentary was thought provoking. As with Thomas K, who wrote, "You don't adjust credit guidelines to meet homeownership or loan production goals, you have to train borrowers/buyers to meet the credit guidelines, i.e., save more, spend less and pay your bills on time." That seems like a good idea.
The key takeaway not being talked about here is the possibility lenders may have tightened lending standards too much in the wake of the mortgage collapse. Loosening them back to normal and doing outreach to train potential borrowers would make a splendid two-pronged approach to this problem.
My recent Editor at Large column on mortgages to same-sex couples also generated a lot of heat. The piece made clear that this Home Mortgage Disclosure Act category wasn't a proxy for lending to the lesbian, gay, bisexual and transgendered community. After all, two brothers can buy a house together for a vacation home. Two women business partners could go in together on an investment. Members of the LGBT community can also get a one-person mortgage on their own. The column said the data was suggestive of discrimination rather than conclusive.
Again, some of the comments prompt a chuckle. An anonymous one said, "How can you discriminate in this business??? Everyone's money is green!!!"
Another anonymous scribe wrote, "I've been in this business 25-plus years and have NEVER seen any discrimination."
Perhaps an eye exam is in order. Just as gambling goes on at Rick's Cafe in "Casablanca" despite official police demurrals, discrimination occurs whenever a qualified candidate is denied a mortgage.
But here's a good point, and eloquently put, from another poster. Bill E said, "I want to lend to everyone I am able to offer a mortgage. What you have to look at in addition to gender, race and ethnicity are credit scores and debt-to-income ratios. Those are the factors on which I must discriminate."
Bill, who is a lender of honesty and integrity, is a thoughtful man whose anonymity we will honor. There is no doubt that if candidates can be brought up to industry standards, as advocated in the comments on the earlier column, he will make those mortgages.
It will be a great day when green is the only color that matters in mortgages. Meanwhile, keep those electronic cards and letters coming in. They will get a reading.
Mark Fogarty, Editor at Large at National Mortgage News, brings more than 30 years of experience to his analyses of the mortgage market.