Issue #62:Are You Sure You Know What Your Frontline Team Is Up to When Talking to Prospective Borrowers?

I saw a very interesting segment recently on MSNBC’s Ari Melber show.  An Black  family had their house appraised after investing $400,000 in home improvements. However, the resulting appraisal was stunningly low. Suspicious, the family had a white friend pose as the owner of the same home. Their friend obtained a second appraisal, with virtually no other differences—just a different owner. 

On that second appraisal, the value of the home went up $500,000.  50% of the total. Same city. Same neighborhood. Same home. Same condition. Different owner.

Of course I have strong feelings on the topic, but I want to focus on just one element of this situation: does racism exist in all levels of our society? Of course. But, just for a moment, let’s ask ourselves how easy it would be for any federal agency—say, the CFPB—to grab onto this one example. 

How big would the penalty be for the lender ordering each appraisal? For the appraisers? Quite possibly, going-out-of-business big. 

I’m not saying the executive team for any of the lending entities was aware of this situation. It is difficult to know just from this set of facts. But I want to seize on the possibility that maybe, just maybe, this was an individual or small group within the lender that had “gone rogue.” If that were true, the owner/executive team of the lender would likely have no idea what was coming until the CFPB arrived on their doorstep. By then, of course, it would be way too late.

My point is simply that, where racism is condoned or even baked into a lender’s practices, the truth will out eventually. But I also believe there are mortgage companies where it’s not all top-down. However, they’re in just as much trouble if they’re not keeping an eye on what their ground-level origination teams are doing. Regularly. Consistently. Broadly. Rogue actors or local instances can be corrected with training or harsher personnel moves if and only if their managers are made aware of the rogue behavior. But if a lender isn’t keeping an active, continuous eye on its interactions with consumers, they’ll be cast in the same light and hit with the same massive penalties as lending firms where racism is inherent at all levels. It is only through a persistent effort at every level of the industry that we can begin to reduce stories like this family’s. 

By the way, I had a great conversation on the topic of organizational diversity and how companies can get started with DEI (Diversity, Equity and Inclusion) programs with my friend Krystal Thomas of the MBA in a recent episode of our podcast, Lodestar’s Lending Leaders.  She offers some very practical, real-world suggestions as well as telling us about what some of our industry’s top lenders are doing about the issue as well. I highly recommend you check it out! (https://youtu.be/c-7T9ZiUGOs)

Got an idea for Deeper Thoughts or LLL? Email me at  jpaolino@lssoftwaresolutions.com.