How the Program Can Help You
Minority homeowners took an incredible hit during the 2007-2009 housing crisis, as their homes tended to contain a greater percentage of household net worth as compared to white households. When housing prices collapsed, these households suffered greater losses and were generally in greater jeopardy of losing their home. Consequently, minority households have had a more difficult time recovering from the Great Recession.
A recent Pew Research study underscored this dilemma by pointing out the increasing inequality of net worth between white and minority households. According to the study, the median wealth of white households in 2013 was ten times that of Hispanic households and thirteen times that of black households.
A new public education program intends to assist minorities with homeownership efforts. “Mi Primera Casa!” (My First Home) is a collaborative effort of the Hispanic Federation and the New York Urban League that is focused on raising awareness of the challenges minorities face in finding and purchasing a home, as well as emphasizing homeownership as a way for minority communities to build their collective wealth and provide economic stability. The program hopes to effect meaningful change through public policy changes as well as educational efforts.
U.S. homeownership was at 64% at the end of last year, and among black and Hispanic families the numbers were even lower (42% and 45% respectively). The white homeownership rate was considerably higher at 71%. In announcing support for the program, Arva Rice, President of the New York Urban League, said, “It’s time for our government, leaders, and America’s financial institutions to work together to offer communities of color an opportunity to close the minority homeownership gap.”
It is difficult for minority households to save up the necessary down payment for a home, but credit is still a challenge for those who do. Hispanic Federation president Jose Calderón pointed out that while black and Hispanic households constitute a combined 30% of the U.S. population, they are able to claim only 12% of U.S. home loans. Calderón refers to this as a systemic problem “that dates back many generations.”
Calderón’s claim is essentially true, but the larger obstacle is more recent. The Dodd-Frank reforms tightened credit in general and made subprime loans difficult to acquire. Banks are beginning to loosen up but credit is still relatively tight across the entire market. Combine this effect with the systemic problems Calderón’s refers to, and the challenges become daunting. Colorlines.com reported that black borrowers were “more likely to be granted predatory subprime loans, even when compared to white homeowners with the same credit score.”
Other studies have confirmed the systemic problems. Julián Castro, the Secretary of Housing and Urban Development (HUD), revealed at a recent Fair Housing Policy Conference that a HUD study concluded that homebuying families of color are discriminated against by being shown fewer properties and charged higher prices.
One of the first efforts of Mi Primera Casa will be to urge the President and Congress to take Fannie Mae and Freddie Mac out of conservatorship and restore them as independent agencies. Both Fannie and Freddie were established to work with mortgage lenders and help more people attain home ownership, especially within the minority community.
To be effective, Mi Primera Casa will have to follow all tracks simultaneously — exposing and correcting discrimination, persuading lenders and government agencies to stretch lending and credit policies to accommodate greater minority lending, and helping minority communities establish the wealth building and saving habits necessary to buy a home. Let’s hope they succeed in their efforts.