New Loan Programs Could Boost Minority Homeownership
In an effort to ease the damage caused by limited lending over the years, lenders’ programs can include thousands of dollars in closing-cost credits, down payment assistance, low-interest loans and/or more affordable housing opportunities for underserved communities.
WASHINGTON – Several banks have rolled out programs to increase buying opportunities for Black home shoppers because their level of homeownership lags behind other minority groups and whites.
“Housing advocates are viewing the programs as efforts to repair the damage banks caused over the years, including the subprime mortgage lending in the early 2000s – risky high-interest mortgages to Americans with scuffed or limited credit – that contributed to the Great Recession and the low Black homeownership rate,” The Washington Post reports.
The banks’ offerings can include thousands of dollars in closing-cost credits, down payment assistance, low-interest loans and expanded affordable housing opportunities in underserved communities.
JPMorgan Chase recently pledged $30 billion to address the racial wealth gap in the U.S. It plans to use that money to offer loans, investments and philanthropy over the next five years, with the largest bulk going toward housing. The bank pledged about $8 billion for funding 40,000 mortgages to Black and Latino homebuyers, and $4 billion will go toward refinancing to help about 20,000 Black and Latino customers lower their monthly mortgage payments.
“Systemic racism is a tragic part of America’s history,” Jamie Dimon, JPMorgan Chase’s CEO, said in a statement. “We can do more and do better to break down systems that have propagated racism and widespread economic inequality, especially for Black and Latinx people.”
Wells Fargo and Bank of America have expanded existing programs targeted at increasing minority homeownership.
Homeownership rates for Black families is near historic lows. In the first quarter of 2020, 44% of Black families owned their home compared to 73.7% of white families, according to Census Bureau data, and the homeownership gap between Black and white Americans has widened since the Great Recession. Meanwhile, the homeownership rates for whites, Asian Americans, and Latinos are gaining.
The recent lender moves comes after years of criticism leveled at banking giants for fostering inequality by denying mortgages to people of color at higher rates than their white counterparts, and by using the now-banned practice of redlining. During the housing boom, studies showed that Black households, even high earners, were more affected by risky subprime loans, which contributed to the foreclosure crisis. For Black homeowners, the foreclosure rate was nearly double that of white homeowners.
“Banks are showing a real financial commitment to making change, and there’s no question that it will help enormously,” says Sonya Mays, CEO and founder of Develop Detroit, a nonprofit housing development company. “But the pledges have to be followed up with structural changes in the banking industry if we’re going to tackle long-standing discrimination faced by people of color.”
Antoine Thompson, executive director of the National Association of Real Estate Brokers, a real estate trade association for Black brokers, says adding more diversity will help banks and the real estate industry increase the homeownership rates among Black Americans.
“The fact is we need more Black loan officers, more Black underwriters and appraisers to effectively deal with the issues of bias in the industry,” Thompson told The Washington Post.
Source: “New Programs Widen the Path to More Minority Homeownership,” The Washington Post (Oct. 31, 2020)
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