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Equity advancements in mortgage lending industry at risk from Anti-Competitive actions of united wholesale mortgage

Beyond the Rhetoric

Harry C. Alford | 3/25/2021, 8:02 a.m.
The COVID-19 pandemic...

The COVID-19 pandemic and events of the past year have helped usher in long-overdue racial equity and diversity and inclusion efforts. An enlightening 12 months for many business leaders and families, the opportunity gap that exists for people of color is now among the most highly discussed topics in corporate boardrooms and at kitchen tables across the United States.

To borrow a point from Coach John Mosley in Netflix’s Last Chance U Basketball documentary series, people “get a window of opportunity but some of our windows” are small.

Unfortunately, the window of opportunity for homeownership just got even smaller for consumers due to the anti-competitive actions of the nation’s leading wholesale mortgage lender – United Wholesale Mortgage (UWM).

Even as society takes major steps forward in prioritizing diversity and inclusion, UWM has advanced a plan that will add a new challenge for consumers, especially people of color, using mortgage brokers for home financing. After losing business in an increasingly competitive industry, UWM gave mortgage brokers an ultimatum, forcing them to decide whether to do business with UWM or competitors Rocket Mortgage and Fairway Independent Corp. To memorialize this, brokers had to sign a contract to these terms if they wanted to continue offering UWM’s services.

Systemic racism impacts nearly all aspects of society, ranging from educational and employment opportunities to criminal justice inequities and healthcare access. Banking and lending, and the way those correlate to home ownership, are no exception. Modern technologies, however, have helped tip the scales toward a fairer system. For example, a recent report published by the Financial Services Innovation Coalition found that artificial intelligence and algorithmic underwriting programs can help reduce racial disparities in the mortgage industry. This includes access, costs and lending capacity, all critical in opening the window of opportunity more and more for people of color.

It is unfortunate that while many lenders are working to diminish these disparities, industry leaders like UWM peddle anti-competitive policies to protect their own business rather than focusing on consumers and expanding access to home ownership, especially when the path typically taken by leaders is to invest and innovate.

Rokers exist in the mortgage industry to provide choice to people seeking loans, including homebuyers and homeowners seeking to re-finance. The value brokers provide is the fast and efficient ability to shop the market and identify the best options for their customers. While comparing rates is the first component that comes to mind for most people, it also includes an analysis of fees, time to close and other factors that contribute to the decision. It also includes the development, deployment and adoption of new technologies, such as AI and modern lending tools.

Brokers also are particularly helpful to those consumers with low credit scores or other loan application challenges, and know which lenders will be willing to give loans to these groups in “higher risk” categories. But by limiting the lenders that are available to brokers, this limits their ability to effectively help consumers, particularly minority populations or low-income groups, which could lead to increased costs or a lack of access to the needed capital to get a loan.

The move by UWM is not just anti-competitive, it is anti-consumer; and is yet another hurdle in the path toward home ownership and generational wealth that is already tilted against families of color.

Harry C. Alford is the president and CEO of the National Black Chamber of Commerce and a leading and influential policy advisor who regularly has a seat at the table on corporate boards and the highest levels of government, including at the White House and on Capitol Hill.