When it comes to slicing and dicing demographics to determine emerging markets, it is often easy to overlook the gay and lesbian community. Unlike other clearly defined segments of the population, statistics regarding the nation's gay and lesbian population can often be nebulous.
In its 2000 data, the U.S. Census Bureau only touched upon the subject of the gay and lesbian population by tracking same-sex couples who lived together (the data recorded a total of 1.2 million individuals present in all but 22 counties across the nation).
However, the U.S. Census Bureau did not provide a total statistical breakdown of Americans defined by sexual orientation – and even if it did, the statistics would obviously be problematic because not everyone is open about their sexual preferences.
For mortgage banking, the specific pursuit of the gay and lesbian customers is a niche market. On the whole, it has not been an actively mined niche.
‘Other parts of the financial services industry, such as financial advisory firms, have done a good job in segmenting and going out to the gay and lesbian audience,’ observes Nina Smith, founder and publisher of Queercents, an online financial magazine. ‘But I never found that with the mortgage banking industry. I've known gay and lesbian mortgage brokers, but I've never seen any advertising or literature put out by the mortgage banking industry.’
That is not to say that there's a total absence of lenders involved here. The National Gay & Lesbian Chamber of Commerce (NGLCC), for example, lists Wells Fargo as being among its main corporate sponsors. And in at least one case, a lender is elbowing away her competition in order to cultivate gay and lesbian borrowers.
‘Why should I give you my business secrets?’ asks Vivian Meranda, with a laugh. As a mortgage banker with Greenpark Mortgage of Needham, Mass., Veranda actively pursues gay and lesbian customers across New England. ‘I have plenty of competition. Its not like that there's an absence of competition out there. Everyone wants a piece of this market.’
One of Meranda's competitors shares her view. ‘It's been a success for me,’ says Steve Dion, a mortgage consultant with Fairway New England Mortgage, also in Needham, Mass. ‘Any company that overlooks this segment has a tremendous missed opportunity. No one can target the gay and lesbian market and not benefit from it.’
For Dion, targeting this community market requires an aggressive outreach program that involves marketing support and visibility at events within the gay and lesbian community. ‘You need to be proactive to get out to these venues,’ he says, noting his corporate support of local gay pride events has paid off. ‘The gay community is very, very loyal to anyone who is gay-friendly and supports the community.’
Notions and nuances
As with other emerging markets, the gay and lesbian community has unique issues. For starters, there is the apprehension of dealing with lenders who could be insensitive or even hostile to their lifestyle.
‘I've spoken to borrowers who have been very shy about going to lenders,’ says Dion. ‘They don't think they'll be sensitive to their needs on how to structure loans.’
According to Justin Nelson, president and co-founder of the NGLCC, lenders can improve the comfort level dramatically by realizing the double edge of certain words and phrases.
‘If you want to succeed here, you need to understand how to speak to this market in a respectful manner,’ he says. ‘For instance, you would use the word 'partner' instead of 'husband' or 'wife.' If you are talking about families, you could say 'all-family-friendly.' There are many nuances that the community would pick up that mainstream audiences would not.’
Nelson points out that 60% of same-sex couples own homes, but he adds they also face very different legal concerns from their heterosexual counterparts regarding homeownership. With that in mind, he advises originators to be cognizant of the legal issues facing same-sex couples.
‘I would recommend working with an attorney who specializes in same-sex housing purchases,’ he says. ‘These agreements are structured differently. For instance, if something happens to one person, you don't want the other person to be fighting the late partner's family for half of the house.’
For Dion, being based in Massachusetts has its own challenges since it is the only state that currently recognizes same-sex marriage. ‘It's a little bit of extra paperwork,’ he says. ‘On the state disclosure, the borrowers can be listed as a married couple. On the federal disclosure, however, they are listed as two borrowers since same-sex marriage is not recognized federally.’
One aspect of the gay and lesbian community that often stands out is the notion of financial vigor. American Demographics Magazine pegs the annual total spending power figure of this community at $515 billion, while Forrester Research has declared the average household income of the country's gay households at $61,300, or 8% above the heterosexual household annual average of $56,900. As with the aforementioned U.S. Census Bureau statistics, the data is not entirely solid – and Smith at Queercents warns this preconception might be too rosy.
‘It's a stereotype,’ she says. ‘There is a myth of gay affluence, and marketers love to jump on this stereotype. Just look at the demographics: You have wealthy gay people and struggling gay people. It mirrors the general population.’
Yet Dion differs on this aspect of the market. ‘This is a community that is very conservative with their spending,’ he says. ‘They have good credit scores, strong reserves and a strong debt-to-income ratio.’
The specter of redlining
However, not everyone is eager to pursue this emerging market. In some cases, the reaction has been anything but welcoming.
A few highly publicized cases of housing-related discrimination against gays and lesbians have popped up recently. In May 2007, a lesbian couple filed a lawsuit against Countrywide Mortgage when the lender threatened the pair with foreclosure after it refused to add one partner to the other's existing mortgage; the case is still pending.
In January 2007, a study in Michigan sent out two-person teams pretending to be homosexual and heterosexual couples to determine the level of housing discrimination in the state. Although the pairs pretending to be homosexual couples were provided with stronger financial credentials in comparison to their heterosexual counterparts, more than 25% of the 120 test cases involving these couples resulted in actual or perceived discrimination during inquiries over rental and sales properties.
‘I think discrimination is happening at a much higher level,’ says Kristen Cuhran, coordinator of investigations for the Fair Housing Center of Southern Michigan, one of the sponsors of the study. ‘We were testing a small amount of targeted areas.’
Cuhran points out there are laws in 17 states banning housing discrimination based on sexual orientation, but Michigan is not among those states. For any local couples who may have faced this situation in real life, their options for redress were close to nil.
‘There weren't many legal ramifications,’ she comments. ‘People will think: 'Who can I go to? Oh, I can't go to anyone if it is legal.'’
For Dion, time is on the side of this segment, and attitudes within the mortgage banking industry will change in favor of gays and lesbians.
‘It is just being identified as a demographic to be targeted,’ he says. ‘For most lenders, that's a segment that is still relatively new.’