The mortgage industry is facing new regulatory requirements that along with changing borrower profiles will require diversity and other sociodemographic business considerations to become a strategic part of business practices. [paragraph] A 2013 study, Diversity Management: Trends and Practices in the Financial Services Industry and Agencies After the Recent Financial Crisis, released by the Government Accountability Office (GAO) identified ethnic disparities in senior-level financial management positions with only 11 percent held by minorities. [paragraph] While the industry's internal demographics have remained stagnant over decades, the demographic profile of first-time homebuyers is becoming increasingly diverse. [paragraph] The millennial generation (ages 18-34) is comprised of 42 percent minorities, and the National Association of Hispanic Real Estate Professionals (NAHREP), in its 2014 State of Hispanic Homeownership Report, projects Hispanics will account for more than half of new homeowners from 2010 to 2020.
Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act was proposed as a solution to improve the career opportunities for women and minorities in the financial services industry, so that institutions can better reflect the face of today's consumer.
Unfortunately, in the face of so many regulatory changes, many mortgage professionals are not prepared for the changes required in their employment and business practices necessary to comply with this provision.
This article provides an overview of the law, expectations for enforcement and practical next steps for implementation. It also offers tips on how to leverage compliance as a competitive advantage in the marketplace.
Section 342 established a department within every federal financial agency called the Office of Minority and Women Inclusion (OMWI). The OMWI is responsible for diversity and inclusion efforts in every area of the respective agency's business operations and within those entities the agency regulates.
The OMWI directors were mandated by Section 342 to develop industry standards for assessing the diversity and inclusion policies and practices of the entities they regulate.
On Oct. 25, 2013, the OMWI directors of six of the federal agencies (including the Securities and Exchange Commission [SEC], Consumer Financial Protection Bureau (CFPB], Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation [FDIC], National Credit Union Administration [NCUA] and the Office of the Comptroller of the Currency [OCC]) released a policy statement with their proposed joint standards. The standards can be utilized to assess and comply with the statute's goals for diversity and inclusion.
The standards are divided into four primary segments: 1) Organizational Commitment, 2) Workforce Profile and Employment Practices, 3) Supplier Diversity and Procurement Practices and 4) Practices to Promote Transparency of Organizational Diversity and Inclusion.
In the proposed form, the agencies recommend that companies use the standards as a starting point to assess their diversity and inclusion efforts and to provide guidance for program implementation.
Organizational commitment refers to the company's commitment by leadership to promote and foster a corporate culture of inclusivity. Standards include:
* Diversity and inclusion corporate policy;
* Strategic plan--the company's considerations for diversity and inclusion in employment and procurement practices, workforce development and corporate culture;
* Progress reports--regular reporting to executive leadership of the company's progress in diversity and inclusion efforts;
* Training--regular training provided to staff on diversity and inclusion; and
* Promotion--proactive steps taken to promote diverse talent into senior-level management positions.
Workforce Profile and Employment Practices
Companies will need to establish diverse channels for recruitment and employment practices that will demonstrate their commitment to promoting the inclusion of minorities and women in their workforce. Standards include:
* Workforce profile--utilization of quantitative metrics to evaluate racial, ethnic and gender diversity in the workforce. Companies may utilize existing metrics, if available, such as their Equal Employment Opportunity Commission EEO-1 report, which collects...