Minority Lending: The new business imperative

Posted By Bernard Nossuli on Jul 20, 2016

So, I just finished reading the following New York Time article about redlining.
http://www.nytimes.com/2016/07/19/business/dealbook/race-strongly-influences-mortgage-lending-in-st-louis-study-finds.html?smprod=nytcore-ipad&smid=nytcore-ipad-share&_r=0

To be clear, redlining, which isn’t specifically mentioned in the article, is at best defined as refusing a loan to someone because they live in an area deemed to be a poor financial risk. In fact, the origin of the word comes from the practice of banks and insurance companies actually drawing red lines around the neighborhoods to avoid.

Redlining is just another form of discrimination. Period. Discrimination should have no place in our society. Period. From headlines in the newspaper to posts on Facebook, we are reminded—loudly and clearly—that it still exists in our society.  
So, let’s look at it another way. Discrimination has no place in the world of business—not just from a moral perspective, but from a profitability perspective, too. This statement is especially true in the world of mortgage lending.    

The next decade will witness the formation of approximately 12 million new households. 12 million! Of those new households, more than 3 out of 4 will come from minority homeowners.
 
Baseline Household Projections

To thrive in the next decade, lenders must do more than just comply with regulations to serve these markets; they must embrace them. While it may seem risky or unprofitable to lend someone money because of where they live or what ethnic/racial/gender/age group they belong to, it will be riskier still to disregard the changing demographics of the lending market. 

Successful banks and mortgage companies will embrace the change and seek new ways to reach these borrowers and incorporate them into their long-term strategies. All moral reasoning aside, continued discriminatory practices will simply lead to financial suicide. 
 

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