A Call For Cooperatives To Close The Racial Homeownership Gap

GreenState Credit Union has committed $1 billion toward home loans for communities of color. CEO Jeff Disterhoft is rallying the entire industry to take similar steps.

Top-Level Takeaways

  • GreenState Credit Union has a goal to fund $1 billion in home loans to people of color by 2030.
  • The cooperative is partnering with non-profits and realtors to impact generational wealth disparities and encourage homeownership within marginalized communities.
  • Internally, the credit union is working to recruit more diverse staff members and tackle unconscious bias.

GreenState Credit Union ($9.5B, North Liberty, IA) is taking steps to make an impact in the marginalized communities it serves. In 2020, the cooperative created a Community Investment Statement with an initial goal of funding $500 million in mortgage and home loans to help close the racial homeownership gap in Iowa. In 2021, it doubled its goal to $1 billion.

Here, Jeff Disterhoft, president and CEO of GreenState Credit Union, talks about the thinking behind this strategic initiative and challenges other cooperatives in Iowa and across the nation to join his credit union in making a real impact in communities where homeownership has been inaccessible.

Ryan Doehrmann, chief mortgage officer, and Lindsay Cannaday, vice president and business development director, also share details about how the initiative works and what is driving its success.

Jeff Disterhoft, CEO, GreenState Credit Union

Why did GreenState decide to focus on homeownership? How did you settle on the $1 billion figure?

Jeff Disterhoft: From our perspective, there are three components to a healthy community: physical health, education, and income to support a reasonable standard of living. As credit unions, we might lack the forum to make a difference directly in people’s physical health or formal education, but we can make a meaningful difference in people’s income. Specifically, the impact owning a home has on generational income.

Housing prices nationwide are up 32% on average and if you’re in a marginalized community where homeownership hasn’t been a part of your family, you’ve missed out on that income. It is significant, and it moves the needle in areas such as educational attainment, personal wealth, and children’s health. If we do a better job of getting home loans in the hands of people of color and historically marginalized communities, we can reverse some of the damage that’s been done during the past several centuries.

The $1 billion is a stretch goal that also represents a little more than 10% of our total assets. Our initial goal a year-and-a-half ago was $500 million, but we’re capable of so much more. To date, we’ve made $178 million in home loans through this initiative.

How does the credit union intend to reach this goal?

JD: We started by tailoring our underwriting standards to people whose domicile is within low-income census tracks. There is also an educational component, which is helpful for those who might not qualify today, to enhance financial wellness so more individuals can qualify in the future. For those who do qualify now, the education helps to ensure they understand how to manage their finances, including maintenance and other expenses, and stay in their home long-term.

5 Ways To Lend A Lot

GreenState intends to make $1 billion in home loans to marginalized borrowers in the next 10 years. To do so, it is maximizing partnerships and channels.

  • Partner with nonprofit organizations serving marginalized communities within GreenState’s markets to sponsor homebuying classes, credit repair, and financial literacy basics.
  • Educate market realtors, especially those who are diverse.
  • Recruit and retain diverse staff members.
  • Focus on internal cultural competency and unconscious-bias to prepare staff to serve all people.
  • Implement a comprehensive marketing plan to promote and brand actions the credit union is taking through non-traditional channels.

What other hurdles beyond underwriting guidelines and education is GreenState planning to address?

Lindsay Cannaday: We must build trust in marginalized communities, which will not happen overnight. We must continue asking questions and analyzing our processes and procedures to make sure we’re removing as many barriers as possible. Partnering with the communities we serve will be key.

We are partnering with credit counselors in each of our markets to deliver one-on-one credit counseling and repair assistance. GreenState is assuming the cost and will set up the borrower with our designated agencies. There are no strings attached.

How will you measure the overall impact this community-investment work will have on your community?

JD: We’re fixated on hitting that $1 billion target; however, I’m also challenging other credit union CEOs across the state of Iowa and hopefully across the nation to consider matching our commitment by investing 10% of their assets over the next 10 years in home loans to marginalized communities. We’re calling it the 10/10 program.

A single credit union in a single market is great, but imagine the combined impact all credit unions nationwide or across even one state could make. A grander collaboration like that would make a meaningful difference in the systemic oppression of people of color. Consider the industry’s total assets of $1.8 trillion. A commitment of $180 billion in home loans to marginalized communities could move the needle, not only for those served by GreenState but also for the country. That’s our long-term goal to encourage other credit unions to embrace and ultimately commit to this idea.

What lessons have you learned so far?

JD: It’s important we’re deliberate about the why behind this initiative particularly for our staff. It’s vital our teammates understand what we’re trying to achieve and how it benefits the community. By and large we’ve had nothing but positive support from the communities we serve, but if individuals do raise concerns or seem hesitant, I use those opportunities to speak to the why behind the initiative and how it benefits everyone involved.

The other lesson learned is that it’s OK to launch quickly and adjust later. We went live and announced our commitment before we had all our ducks in a row. We had the policy developed for the most part but not fine-tuned in the way we normally would. This created a sense of urgency and forced us to move quickly in a short timeframe. You can always modify small things, but if you delay you might miss an opportunity to make a difference in the lives of others.

RD: We are still early in the process on the underwriting side, but we are committed to adapting and learning from any mistakes we make along the way. We have partnered with NAMMBA (the National Association of Minority Mortgage Bankers Association) to become ASIL Certified (Accredited Social Impact Lender). NAMMBA will help us improve our plan and playbook on this program.

What advice do you have for other credit unions?

JD: Give the 10/10 commitment some serious thought. Here in Iowa, our population is expected to grow by 440,000 people over the next 18 years. Comparatively, the population of people of color in our state is expected to grow by 500,000. That means all our state’s population growth, and then some, over the next 18 years will come from people of color. This is an instance when doing good for our community will intersect with what’s good for business and that doesn’t happen often.

The second reason I encourage other CEOs to consider this is because it resonates with employees especially younger employees. Recruiting and retaining talent is a challenge for the entire industry, and I have been surprised by how much our staff has embraced this work. It’s become something positive to rally around and a reason they want to be a part of the credit union.

LC: Join us. Commit 10% of your total assets to homeownership initiatives that are targeted at marginalized communities. We will not be able to close the gap alone. We need our peers and competitors to step up and partner with us to make an impact.

This interview has been edited and condensed.

June 6, 2022

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