We had a vibrant discussion in Chicago recently on barriers facing women trying to access mortgage and small business credit and ways to support women’s efforts to build wealth. Woodstock Institute and JPMorgan Chase hosted a forum for about one hundred participants from the nonprofit, banking, and government sectors on June 19. Melissa Bean, Midwest Chair for Chase, and I welcomed the group and kicked off the event.
The first panel included Woodstock Vice President Spencer Cowan, who presented on our new report, Her Longer Road Home: Disparities in Mortgage Lending to Women in the Chicago Region. With the exception of the lowest-income women, the report found, mortgage and refinance lenders originated loans for women, in general, and women applying with a co-applicant at substantially lower rates than for men or men with co-applicant, even controlling for loan-to-income ratio. Kim Nevels, the director of the U.S. Department of Housing and Urban Development (HUD) Chicago office on Fair Housing and Equal Opportunity, presented on discrimination against pregnant women in mortgage lending, and shared a story of how a New York oncologist was first approved for a mortgage, then denied the loan when the lender learned she was maternity leave (without even asking whether her income continued, which it did). Candace Baldwin of Capital Impact Partners in Washington, DC, presented on issues affecting older women, products needed to help older adults and people with disabilities stay in their homes or communities, and the dangers of cognitive decline, carrying debt longer, reverse mortgages, lump sum distributions, and failure to plan for long-term health care. She emphasized that most caregivers are women and many are unpaid or underpaid. Head of the Office of Nonprofit Engagement for Chase, Naomi Camper, moderated.
Audience member comments included: many homeowners are still underwater on their mortgages; others will need to refinance loans when loan modifications have rate resets and balloon payments at the end of the mortgage; and, student loan debt burdens make it difficult to qualify under qualified mortgage maximum debt-to-income (DTI) ratios.
The second panel featured Emilia DiMenco, President and CEO of the Women’s Business Development Center (WBDC), who shared that currently less than five percent of the total dollar amount of small business credit goes to women-owned businesses, even though they comprise about 30 percent of all businesses. She discussed the need to provide technical assistance (TA) to women entrepreneurs who often lack the financial acumen to match the type of loan they need to the type of lender that can provide it. WBDC tries to build capacity to get women-owned businesses to the $1 million mark, sometimes through mergers and acquisitions. Robin Lee Greiner, COO of Accion Chicago, a CDFI, shared how banks that say “no” to women small business owners often refer them to Accion for the TA and more flexible underwriting that the women need. While banks tend to make larger dollar loans and use automated underwriting processes, Accion and similar micro lenders have the capacity to “look at the story” behind the entrepreneurs’ numbers to determine whether a small business loan is viable.
Andrea Herrera, CEO of Amazing Edibles Catering, shared her story of obtaining a loan from Accion after being turned down by four banks. Paras Desai of the City of Chicago’s Innovation Delivery Team described some of the threats presented by the growing number of start-up online lenders and merchant cash advance (MCA) companies that are stepping into the unregulated void and charging high rates (like “payday for small business”) and burdensome prepayment penalties, and some of the steps the City is taking to increase access to affordable credit for small businesses, such as a creation of a $2 million revolving loan fund, an education campaign on CTA buses, “mini MBA training,” Small Business Opportunity Centers, and a set of best practices for small business lending. Laura Helmuth, Chase Chicago City Market Manager for Business Banking, moderated.
Audience members shared that banks often buy portfolios of small business loans from CDFIs and can receive credit for doing so under the Community Reinvestment Act (CRA). Banks can also receive CRA credit for funding micro lenders’ operations, programs, and loan funds. Panelists agreed that MCA and similar new products could be useful but all such products must be based on effective ability to repay standards. Business owners should be encouraged to carefully document and report their income and develop a good personal credit history to create a solid record to support loan applications. Other audience members shared how domestic and sexual violence hinders women from establishing economic security and strong credit records. Women and Latinos are some of the fastest growing segments of home buyers and businesses owners. People who speak Spanish and other languages, people with developmental and other kinds of disabilities, and immigrants from different cultures need culturally competent training, materials, and assistance.
What can be done to level the playing field for women
Based on the panel presentations and audience comments, I was struck by several themes that applied to both the housing and small business issues:
- Consumers continue to feel the deep and negative impacts of the foreclosure and financial crisis and the burden of unregulated, high-cost products. To avoid such impacts going forward, we must create and enforce “ability to repay” standards.
- Given the fragile financial status and greater longevity of many older women, it is important to take steps early on to provide for the long term, including health care needs later in life.
- There is an ongoing threat of old and new scams that call for increased vigilance, enforcement, and education to protect consumers and low-wage workers.
- Education and technical assistance (TA) are necessary, but not sufficient, to address barriers to women’s wealth building. There is a need for private industry leadership and partnerships with nonprofits as well as effective government supervision, regulation, and enforcement to address structural inequalities and systems failures.
- Lenders, regulators, and TA providers must value and require cultural competence, inclusion, and diversity of all kinds in order to effectively meet community needs.
- Issues affecting low-wage workers, especially women in the lowest paid and unpaid jobs such as caregiving, are directly related to women’s wealth gap and lack of financial security.
- At the policy level, panelists and audience members suggested a wide range of actions:
- Mortgage lenders should examine their mortgage lending processes to detect and correct potentially discriminatory practices.
- Banks and bank examiners should consider the barriers to women’s wealth building as part of the CRA performance context and hold banks to high standards for meeting the mortgage and small business finance needs of women and other marginalized populations.
- Regulators should further investigate possible gender discrimination in mortgage lending practices, particularly for lenders with above-average disparities.
- Policymakers must ensure the ongoing availability of the disparate impact doctrine for civil rights enforcement, especially if the US Supreme Court goes against established practice and decides that the Fair Housing Act does not allow use of the doctrine.
- The Consumer Financial Protection Bureau (CFPB) must expeditiously finalize enhancements to the Home Mortgage Disclosure Act.
- The CFPB should raise small business lending to the top of its agenda and quickly implement its authority under the Dodd-Frank Act to improve the collection and dissemination of additional data on small business lending, including data on gender, race, the size of the loan, and loan applications that were denied.
- Workers and policymakers must continue efforts to raise the minimum wage and require paid leave and access to retirement savings plans for all workers and to rigorously enforce equal pay laws and anti-discrimination laws.
- Policymakers should consider enacting property tax exemptions for seniors and people with disabilities to do weatherization, home modifications that allow them to stay in their homes.
- Policymakers should consider enacting policies to pay people who provide needed home care to family members and save governments money that would otherwise be spent on costly institutional care. Women represent a disproportionate number of such unpaid caregivers, who then have fewer contributions to Social Security and retirement plans and end up financially insecure.
Finally, there are ways that individuals can take action to support wealth creation for women, including:
- Make an effort to hire women-owned businesses such as caterers and other professionals.
- Support businesses that hire, promote, and fairly treat women workers when you shop.
- Conduct your personal business with banks that do a good job of fairly lending to women and urge banks that do not have a good record to improve their performance.
- Let CFPB know if lenders are treating women unfairly. Submit complaints and stories to www.consumerfinance.gov.
- Submit comments to CFPB on forthcoming small business rules (sign up for Woodstock’s newsletter and policy alerts.)
- Submit comments to a bank’s CRA file and to its regulator (ask www.ncrc.org who is the regulator-OCC, FDIC, or Federal Reserve).
- Ask your elected representatives to support the above policies.
- Make charitable donations to nonprofit organizations who are doing effective work to improve opportunities for women to build wealth.
Thanks again to Chase for sponsoring Woodstock’s research on women’s access to mortgage finance and for co-hosting our June 19 event and thanks to all who attended and made it a great learning experience. The views in this article are mine and do not necessarily represent the views of Chase or its staff.