FHFA Dives into Diversity and Inclusion

For Melvin L. Watt, Director of the Federal Housing Finance Agency, diversity and inclusion in the mortgage and lending arena is “a business imperative” that goes far beyond political correctness and statutory obligations outlined in the Housing and Economic Recovery Act of 2008.

In his talk at the Federal Home Loan Bank Directors' Conference in Washington, D.C., Tuesday, Watt called for greater attention to diversity and inclusion of women and minorities at the federal loan level and outlined the FHFA’s “roadmap to help drive integration of diversity and inclusion in a systematic way.”

Watt said the FHFA has surveyed FHLBanks (Federal Home Loan), the FHFA Office of Finance, Fannie Mae, and Freddie Mac about what they have done about diversity and inclusion organizational framework, strategic planning efforts, supplier and workforce diversity programs, and reporting procedures. This information, he said, will be used to establish benchmarks against which the FHFA can measure and evaluate each entity's progress.

He also said that FHFA will develop examiner guidance, hire and train examiners, and establish consistent examination methods and practices for all regulated entities in 2017.

Watt also outlined the agency’s plan for an amended minority and women inclusion regulation “that would direct all of our regulated entities to undertake diversity and inclusion strategic planning, either on a stand-alone basis or as part of their overall business strategic planning process.” This, he said, is designed to ensure that each regulated entity develops its own comprehensive approach to integrating diversity and inclusion systematically into its business and activities throughout its organization.

As for progress at the FHLBanks themselves, Watt said the FHFA is looking into whether to provide guidance about incorporating diversity and inclusion in assessing FHLBank executive incentive compensation programs, modeled in large part after voluntary programs already run by the Chicago, Dallas, and Pittsburgh FHLBanks to tie their executive compensation to specific diversity and inclusion goals. Watt also called for increasing diversity on the boards of all FHLBanks.

“Ultimately, it is our hope that our regulated entities will provide leadership on diversity and inclusion for the housing finance industry as a whole,” he said.

Watt’s talk on diversity was part of his overall discussion of the state of the FHLBanks, which, he said, turned a profitable 2015: All eleven FHLBanks were profitable, with a net income of $2.9 billion. The system reaped $688 million in gains from litigation settlements and saw assets increased 6.1 percent to $969.6 billion, driven primarily by increases in advances to members, making 2015 the FHLBanks system’s most profitable year ever.

Nevertheless, he said, FHFA is paying close attention to whether the FHLBanks are sufficiently focused on their core mission of providing advances and supporting secondary mortgage market access for member institutions, as much as its members’ efforts to increase diversity and inclusion.

The Five Star Institute has a wide footprint in furthering the diversity and inclusion agenda in the mortgage industry with the newly announced 2016 Five Star Diversity Symposium and its member organization, the American Mortgage Diversity Council (AMDC).

The inaugural Five Star Diversity Symposium is a day-long event focused on advancing the conversation on diversity within the mortgage industry. The event will be held Thursday, June 16, 2016, at the The Belo Mansion, Dallas, Texas. Headline topics that will be covered at this event include: Thinking Outside the Box: The Future of Diversity in Mortgage Lending, The Bottom Line: The Business Case for Diversity & Inclusion, Incorporating Diversity and Inclusion Practices Into Your Compliance Management Program, Building the Best Team, and The Weakest Link: Issues in Supply Chain Diversity.

Click here to register for the 2016 Five Star Diversity Symposium.

The AMDC, a Five Star Institute member organization, is comprised of executives from various mortgage companies and aims to shape the diversity agenda. The council, launched in June 2015, was created to drive results that support the application and promotion of the mortgage industry’s best diversity practices, and advancing solutions that support initiatives outlined by Section 342 of the Dodd-Frank Act.

“The dialogue around diversity in the mortgage industry has not been advanced the way it needs to be,” said Five Star Institute President and CEO Ed Delgado. “Five Star was presented with a tremendous opportunity to fill a leadership void and we will work with our industry partners to set the bar for diversity in the industry.”

Editor's note: The Five Star Institute is the parent company of MReport and theMReport.com.