Nation's Housing Recovery Eludes Black America
New Report Finds Lost Wealth, Access to Mortgage Remain Problematic
Charlene Crowell | 2/20/2014, midnight
Black America’s barriers to building wealth are the focus of a recent research report jointly authored by the National Urban League and Zillow, Inc., the largest home-related marketplace on the web. A House Divided: How Race Colors the Path to Homeownership, analyzes the nation’s recent and uneven financial recovery.
According to Dr. Stan Humphries, Zillow chief economist, “It’s been more than 50 years since Dr. King fought for equality, yet it is apparent that the American Dream of homeownership is not equally shared by all, even today. Our research shows that minority home buyers are encountering difficulties that often aren’t shared by White home buyers, and that even after they achieve the dream, they have been less likely to see a similar return on their investment.”
Commenting on the new findings, Nikitra Bailey, executive vice-president with the Center for Responsible Lending (CRL) noted, “It is concerning that families of color remain underserved in our current mortgage system. Owning a home remains an important building block for families to create economic stability. Thus, the primary and secondary mortgage markets have a responsibility to ensure that all Americans who are qualified can access responsible mortgage credit.”
The report used three data sources – the most current Home Mortgage Disclosure Act (HMDA) data, Zillow’s own Home Value Index Data and a December 2013 survey of persons who applied for mortgage loans in the past three years and revealed that America’s historic racial divides in housing still remain:
· Although Blacks and Latinos respectively comprise 12 and 17 percent of the nation’s population, they represent only three and five percent of those applying for conventional mortgages;
· Black mortgage applicants have the highest loan application denial rates of one in four; while the denial rate for Whites is one in 10; and
· While nearly 74 percent of Whites own their homes, Black homeownership is 46.5 percent.
The report’s foreword, written by the National Urban League (NUL) says in part, “Sadly, according to the study, African-Americans and Hispanics are less likely to apply, and be approved for home mortgages than Whites. They have lower incomes, lower homeownership rates, less equity in their homes and as a result, less wealth.”
Both the HMDA data and the consumer survey found that Blacks and Latinos had a lower average income and lower credit score compared to Whites. Consumers in these groups were also more likely to apply for an FHA mortgage requiring a 3.5 percent down payment or a VA loan with no down payment rather than pursue a conventional loan mortgage with higher down payment requirements.
When Black consumers sought a conventional loan, they were 2.4 times more likely to be denied than White applicants. Latinos fared similarly and were 1.98 times more likely to be denied than were Whites.
The report’s foreword cited earlier CRL research that determined found the average Black and Latino families respectively require 28 and 17 years to save for just a five percent down payment. If the savings goal is for a 10 percent down payment, the years required to save grow to 31 and 26.
Most importantly, CRL research determined that risky mortgage terms -- not low down payments -- were the cause of the housing crisis.
The report offers the following policy recommendations as remedies for today’s housing issues:
· Establish and enforce meaningful affordable housing goals for Fannie Mae and Freddie Mac, both Government Sponsored Enterprises;
· Discourage policies that advocate arbitrarily high down payment requirements; and
· Support the Consumer Financial protection Bureau’s efforts to protect consumers from predatory lending practices.
Summarizing CRL’s perspective, Bailey concluded, “We know that borrowers of color will comprise the majority of future homebuyers. Therefore, it is in our national economic interest that mortgage lending policy does not harmfully exclude communities with a demonstrated history of success in homeownership."
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.firstname.lastname@example.org.