December 5, 1997

Will better trained salespeople increase minority homeowners?

By TOM KELLY
The Real Estate Advisor

I agreed with Andrew Cuomo -- at least for awhile. The Secretary for Housing and Urban Development told the recent National Association of Realtors that salespersons who are sensitive to cultural diversity are essential to increasing the number of minority homeowners nationwide. That makes sense, I thought, because the housing ladder will be pushed by first-time home buyers -- many of whom will be relatively new to the United States.

The United States Census Bureau reported more than 800,000 immigrants entered the U.S. in 1996, about one-third of the country's population growth last year. Many analysts believe that these immigrants hold the keys to the residential building industry but also to critical segments of the economy. That's because many newcomers pay cash, reducing the concerns of escalating consumer debt.

So, declaring the government's "commitment to the American dream," Cuomo established a cultural sensitivity training program for real estate agents in conjunction with the NAR.

"It's new and different and I think a better way to do business," Cuomo said. "There are cultures where a handshake -- where you put out your hand -- seems offensive. If you want to sell homes, if you're in the business, you got to know how to communicate."

The "One America" program is designed to train agents to better serve their multicultural clients and encourage people of different ethnicities to join the real estate industry. It will provide certificates to agents who successfully complete the program's training.

"There are people who are locked out of home ownership due to financial barriers and cultural barriers," said Russell K. Booth, president of the National Association of Realtors. "This program will go a long way to address that problem."

That was all well and good. However, when it came time for the nuts and bolts, the housing officials who gathered to announce the new program were short on details. Nobody seemed to know exactly when the program would be launched or how it would work.

When asked directly who would finance the program and how much would it cost, Cuomo shot an inquiring look to the Realtor contingent in the room that inferred "you guys had better know this because I don't."

Steve Driesler, the NAR's chief lobbyist, jumped in to say NAR had earmarked $250,000 for the cultural diversity training program and that HUD was going to "redirect" some funds for the project.

Both statements appeared to come as a complete surprise to Cuomo, though clearly it would be in HUD's best interest. Two years ago, 349,000 first-time homebuyers -- approximately 40 percent of all the first-timers -- received mortgages guaranteed by the Federal Housing Administration, an agency governed by HUD. Similarly, 47 percent of all African-Americans and 42 percent of all Hispanics purchasing their own homes last year were financed via FHA.

The United States is enjoying its highest homeownership rate in history, about 66 percent, Cuomo said. However, homeownership rates for minorities especially black and Hispanic Americans significantly trail the national average by 20 percentage points. Nearly 75 percent of white people own their homes, compared to 45.8 percent of black people and 43 percent of Hispanics.

For years, FHA loans had to live with the perception of being heavily wrapped in red tape. Some of that was unraveled a decade ago when the department gave "direct endorsement" authorization to private lenders so that they could process loans in-house without waiting for FHA approval. Other minor shortcuts have been made, but FHA loans -- like conventional loans -- have become fatter files due to a variety of new disclosure forms and regulations.

FHA insures loans so that if the borrower defaults, the lender is guaranteed to receive the outstanding mortgage amount. For the past 60 years, it has been the primarily low-downpayment option for homebuyers. FHA loan popularity has dwindled in the past decade as the private market grew more sophisticated and efficient in creating and providing mortgage money.

To qualify for the new One America certification, agents must pass course work on customs and culture and have no Fair Housing Act violations on their record. Graduates will be allowed to use a new logo stating their cultural training on business cards, signs and stationery.

Will teaching sensitivity to salespersons make a big difference in minority home ownership numbers?

Not by itself, Cuomo said. But there is a need for a program that takes a softer approach than that of the Fair Housing Act.

"The traditional government response to this type of a problem is legislation," Cuomo said. "The market is changing and we have never dealt with the way other cultures do business. We have never really had these tools. You have a stick. How about a carrot?"

The offer would at least feel more genuine if everyone knew more about the carrot.

Previous columns:

• Home loan rates will remain flat, 11-27-1997
• Boeing, CB-Bain sign affinity marketing deal, 11-21-1997
• Home-equity: Should you bet the roof?, 11-07-1997
• Builder sweetens Costco dealer for agents, 10-31-1997
• Should you increase your title insurance coverage?, 10-24-1997
• As interest rates dip, refinancing options abound, 10-10-1997
• Feds clean up Fair Credit Reporting Act, 10-03-1997
• JLS being 'proactive' with Costco deal, 09-26-1997