Despite historically low interest rates, America has been unable to substantially help black and brown families obtain mortgages to increase black homeownership.
— Lydia Pope, President of NAREB
WASHINGTON, DC, USA, July 25, 2022 /EINPresswire.com/ — In testimony before the House Financial Services Committee, Lydia Pope, chairwoman of the National Association of Real Estate Brokers (NAREB), called on Congress to enact a nationwide down payment assistance program and other measures to help increase homeownership among African Americans.
Titled “Boom and Bust: Inequality, Homeownership, and the Long-Term Impacts of the Hot Housing Market,” last month’s hearing led by committee chair Rep. Maxine Waters (D-CA) explored why Blacks and Hispanics were unable to take advantage of the vast expansion in homeownership when interest rates were low and now face an uphill battle with mortgage interest rates that have nearly doubled compared to a year ago.
“It is unconscionable that despite historically low interest rates, this nation has still not been able to ensure that historically underserved and excluded (minorities)” can obtain loans to buy homes, the rep said. Waters at the start of the hearing. Representative Waters explained that the housing market was hot during the pandemic due to historically low interest rates, a build-up in demand, a more mobile workforce and a housing shortage. .
Further, Pope said, “Rising interest rates in the housing market are widening the wealth gap, setting more and more black people back from participating in the American dream today. Black ownership is almost 30% behind white America and less than 50 years ago.
Pope also noted that the COVID pandemic has created major shifts in the housing market, such as cash-buying investors dominating a market where the stock market was already weak, a move that has reduced opportunities for those seeking to buy houses and which has contributed to the rapid increase in rental prices throughout the country.
In outlining ways to increase minority homeownership, Pope cited NAREB’s four-part plan:
Down payment assistance. Currently, there are down payment assistance options available to families, but most come with strings attached that may affect their ability to get a home loan. For example, the programs rely on a second mortgage or more stringent salary and credit score requirements. Other proposals want to tie down-payment assistance to a tax credit, but this kind of relief does little to help a family who can’t close their home because they can’t afford to pay. the down payment. NAREB supports the federal grant program for down payment assistance that Rep. Waters has championed in the House. NAREB is urging the Senate to pass similar legislation.
Student loan debt. Four years after graduating from college, black people owe an average of $25,000 more in student debt than their white counterparts, and black people leave school with an average of $52,726 in student debt . Student loan debt affects black people’s ability to buy homes. There is an inconsistency in the calculation of student loan debt in the debt ratios of the mortgage underwriting process. Fannie and Freddie recognized income-based payment plans that reduce monthly debt-to-equity calculations. But that does nothing to remedy the fact that real student loan debt continues to rise. While NAREB strongly supports the elimination of certain student debt, a uniform underwriting standard is needed for the Federal Housing Administration, Fannie Mae, Freddie Mac, and the Veterans Administration.
Loan Level Price Adjustments (LLPA). An in-depth study by the Journal of Financial Economics found that equivalent-risk Latinx/Black borrowers pay significantly higher interest rates on GSE-securitized and FHA-insured loans, especially in minority neighborhoods. The researchers estimate that these rate differences cost minority borrowers more than $450 million a year. The LLPAs are the culprits. Even if someone qualifies for a loan, lenders can adjust the interest rate based on credit scores. In addition, private mortgage insurance companies can also increase their rates. These additional costs can push potential buyers out of the market. NAREB is seeking an end to LLPAs and wants it to be established that if a family qualifies for a mortgage, they get the loan at no additional cost.
Fair assessments. NAREB wants to end valuation bias when black people sell their homes or need an appraisal on new ones. A Biden administration task force concluded that “biases in home valuations limit the ability of black and brown families to enjoy the financial returns associated with homeownership, thereby contributing to the wealth gap.” already sprawling race”. A Brookings Institution study shows that homes in black neighborhoods are priced 23% less than similar homes in white neighborhoods. A 2021 Redfin study found that homes in black neighborhoods are undervalued by $46,000 on average, a consistent gap over the past decade. The assessment review process is deeply flawed and needs to be fixed. After appeal, less than 3% of assessments are revised. Of the approximately 78,000 evaluators across the country, only 2% are black.
“I employ the committee, legislators, administrative officials, GSEs, housing regulators and directors to join NAREB in promoting and securing democracy in housing,” Pope said.
ABOUT THE NATIONAL ASSOCIATION OF REAL ESTATE BROKERS
NAREB was established in 1947 to ensure the right to equal housing opportunity regardless of race, creed or color. NAREB has advocated for legislation and supported or initiated legal challenges that ensure fair housing, sustainable homeownership, and access to credit for Black Americans. Simultaneously, NAREB advocates and promotes access to business opportunities for Black real estate professionals in each of the real estate disciplines.
Michael K. Frisby
Frisby & Associates
Home Financial Services Hearing: “Boom and Bust: Inequality, Homeownership, and the Long-Term Impacts of the Hot Housing Market”