The Face Of The Lending Landscape Is Changing

Lenders need to mirror the communities they serve to survive the next wave of buyers

Dr. Vanessa Montañez
Face of Lending Landscape

The face of the lending landscape is changing. The buyers today are diverse. For a lender to stay relevant and thrive, changes are needed. So who is the typical buyer of today?

According to the National Association of Realtors 2021 Profile of Homebuyers and Sellers, the typical buyer was 33 years old, while the typical repeat buyers were at an all-time high of 56 years of age. According to Freddie Mac, millennials purchased more than half of all mortgage loans in the past two years (2020-2021). Millennials surpassed baby boomers as the largest demographic in 2019 at 72.2 million in population. (U.S. Bureau 2019). Millennials are the largest and most diverse segment of buyers. Minorities make up 45% of the millennial population. The buyer is young. The buyers use technology as a tool to buy everything, including homes and rates.

For a lender, radical changes need to occur. First, the lender needs to mirror the communities they serve. Second, the lender needs to hire a diverse sales organization. Third, the lender needs to understand the market needs. If the buyers are younger and more diverse, the lender needs to hire accordingly.

For example, we will look at the population of Los Angeles, roughly 3.8 million. Hispanics account for 48.5% of the population, white population for 28.5%, Asian population for 11.8%, and Black population for 8.8%, leaving 2.8% as other. (U.S. Census Bureau QuickFacts). Common sense would lead the lender to look at who their employees are in the Los Angeles market. All financial institutions understand that Los Angeles is the second-largest city in the United States, making this the mecca for mortgage lending. The average sale price in Los Angeles per realtor.com is $998,000, making originating a lucrative business. Los Angeles has near-perfect weather, cultural diversity, and sprawling businesses. Los Angeles has the third-largest GDP, followed by Tokyo and New York.

Changing Lending Landscape

Los Angeles lenders looking to grow their teams can ask the following questions:

Is the sales force in Los Angeles diverse? Are most of the employees Hispanic? Are the employees younger? How is one growing new talent? How is one hiring diverse talent? A new strategy needs to occur immediately to pivot and thrive in the changing landscape. For example, the average age of loan officers is 44 years old. The most common ethnicity of consumer loan officers is white at 67.8%, followed by Hispanic at 14.5% and Black at 8.6%. (Consumer Loan Officer Demographics and Statistics [2022]) We need to grow new talent. The loan officer of today needs to be younger. The loan officer of today needs to be more diverse.

What is a reality in the workplace of a typical loan officer now is not what is the reality of the population in Los Angeles. Lenders need to mirror the communities they serve to survive the next wave of buyers. Buyers are younger and diverse. Buyers want to be understood and represented. If one adds language needs, that adds another layer of complexity. Not only does one need to mirror the community one serves, but it also meets the language and cultural nuances to complete the transaction. One solution is hiring, training, and making changes.

The Joint Center for Housing of Harvard University said, “In 2015, Millennials headed only 16 million of the nation’s 124.5 million households. By 2035, however, they are projected to head 49.8 million households and thus reshape demand in a profound way.” (Joint Center for Housing of Harvard University, State of the Nation’s Housing 2019) Additionally, another study found that between 2020-2040, 70% of new homeowners will be Hispanic/Latino — with the median age of 29.8, nearly 1 in 3 Hispanic/Latino are in their prime home buying age. (NAHREP 2020 State of Hispanic Homeownership Report) Millennials and Hispanics are the waves of new buyers and homeowners.

Mirror Your Community 3

Companies, lenders, and employers need to take stock and reassess their hiring strategies. Having a diverse company makes sense and provides a higher return on investment. McKinsey & Company researched 1,000 companies in 15 countries in their report for 2020, and the numbers were staggering. “Our latest analysis reaffirms the strong business case for both gender diversity and ethnic and cultural diversity in corporate leadership — and shows that this business case continues to strengthen. The most diverse companies are now more likely to outperform less diverse peers on profitability.” (Dixon-Fyle et al.)

Those companies with gender, ethnic and cultural diversity had a 36% return on investment. The greater the representation of the diversity of an organization’s management and staffing levels, should provide greater the return on investment. The reports, articles, and data show that companies need to change as the times change. Those companies that do not change will face challenges. The gap will deepen, and the losses will be experienced.

One solution for growing a diverse workforce is interviewing, hiring, and training a diverse workforce. The recruiter or manager needs to interview 3-5 candidates for every position open. Are the candidates women diverse candidates and a representative of the community they serve? Is the candidate mirroring the community’s needs? One needs to be fair and equitable when interviewing and hiring a candidate. How well does the candidate know the community and market they are applying for? The candidate needs to look at the part and understand the market they are applying for the role. Who are they currently doing business with? Who are their top centers of influence? What organizations do they belong to or are a member of? As the interviewer, keep all the questions the same and consistent.

Having consistency will provide a range of answers from the candidates. The example provided of Los Angeles shows that most of the population is Hispanic/Latino. If the role of a loan officer in Los Angeles was open, who would you hire? Data shows that the majority of the population is Hispanic. Would the ideal candidate be bilingual, Hispanic, or millennial? The answer is it depends. Did you interview 3-5 candidates? Were the candidates diverse? Who is the best candidate? Who answered the questions the best? There are no easy solutions, but there can be a road map to hiring the best talent by understanding the markets one is serving.

Taking it one step further, are the managers and recruiters mirroring the communities they serve? It is enough to hire diverse candidates and have the decision-makers look like their community. Many companies do not have women or diverse representation on executive teams. In the McKinsey report more than a third of the companies in the data set had no women at all on their executive teams. The lack of diversity is evident when you look at the executive teams, middle management teams, and management teams across the industry.

Finally, what training is being provided? Are you keeping up with your regulatory training? Are you providing training on fair lending? Discrimination? Unconscious Bias? It is important to develop and retain skills, knowledge, and understanding of our business. By training our employees it boosts productivity, employee turnover, and improves company culture. The better your loan officers are trained the better equipped they are to originate and provide excellent service. Training will enhance their knowledge and skills.

This is a wake up call. The numbers show a compelling story. The face of the lending landscape is changing. Is your company making the necessary changes to thrive? Or is your company decaying? Business and the buyers are changing. It is up to you to stay relevant and informed.

This article was originally published in the Mortgage Women Magazine September 2022 issue.
Vanessa Montañez
Dr. Vanessa Montañez

Dr. Vanessa Montañez is the CEO and Co-founder of LeadHER Talks, a forum to enrich, empower, and educate women and a Mortgage LeadHER.

Published on
Sep 13, 2022
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