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Wednesday, February 28, 2024

State of Black Homeownership: More denials than access to mortgages

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This week in Houston, the nation’s oldest minority professional real estate trade association held its 68th annual convention. Founded in July 1947, the National Association of Real Estate Brokers (NAREB) grew from a fledgling group of one woman and 11 men from only eight locales, into today’s national network of mortgage professionals and an estimated conference attendance of more than 1,000.

Long before civil rights legislation was introduced in Congress, NAREB stood for all those who believed that owning a home in America should be both affordable and obtainable; but were somehow locked out of their own American Dream.

That kind of leadership and service deserve a celebration. In spite of restrictive covenants commonplace as early as the 1940s, to the years of block-busting and white flight of the 1960s, NAREB and other housing advocates held fast to their founding principles and never gave up or gave out.

The irony is that today despite their dedication and advocacy of other housing groups – or even federal laws that guarantee equality and protections in housing and credit regardless of race or creed — the American Dream is still elusive, especially for consumers of color. Nationwide, Black America’s homeownership is shrinking. A 2013 NAREB report entitled, The State of Housing in Black America, found that Black homeownership rates dropped from a high level of just of under 50 percent in 2004 to 43 percent by 2013.

By late 2014, according to the U.S. Census Bureau, only 42 percent of Black families were homeowners, more than 22 percentage points lower than that of the nation (64 percent) and 30 percentage points lower than that of Whites (72 percent).

The obvious question is: Why is Black homeownership shrinking?

An analysis by the Center for Responsible Lending (CRL) of the most recent Home Mortgage Disclosure Act (HMDA) report for 2013 showed that both Black and Latino homebuyers are typically denied access to private sector conventional mortgages that over the life of a loan are far cheaper than the government-backed offerings. Little access to private conventional loans leaves consumers of color with disproportionately high use of mortgages underwritten by government-backed programs such as FHA, VA and USDA.

Those entrusted with leadership positions must develop answers to these and other housing dilemmas. This national problem, as analyzed by CRL, deserves a response equal to its challenge:

  • Blacks received in 2013 only 36,903 loans – just 4.8 percent of all purchase mortgage originations that year, despite the Black population at 13.6 percent, exceeded 39 million residents.
  • Hispanic white borrowers received slightly more mortgage originations at 7.3 percent of all purchase mortgage originations in 2013, even though they represent16.6 percent of the population and over 51 million people.
  • Similarly, in refinance mortgage lending, Black borrowers received only 191,004 – only 4.4 percent of more than 4.3 million the previous year. This comparatively low level of lending continues a trend that began after the nation’s housing crisis.

“When families receive responsible mortgage loans, they are able to build a financial safety net that they can access during challenging times,” noted Keith Corbett, a NAREB panelist and executive vice president with the Center for Responsible Lending. “For most Black families, owning a home is the key building block for their financial security. Until we raise the level of Black homeownership, it is doubtful we will see racial wealth gaps closing either.”

Earlier CRL research found that many homebuyers of color were steered into higher-cost, subprime loans – even when they qualified for cheaper ones. After analyzing 50,000 subprime loans, CRL concluded that Blacks and Latinos were almost a third more likely to receive a higher-priced loan than were Whites with the same credit scores.

Additionally, research by the Center for Community Capital at the University of North Carolina found that borrowers of color and low-wealth families who received safe mortgages that were fully-underwritten during the housing crisis saw their home equity appreciate by $23,000.

Earlier this summer Harvard University’s Joint Center for Housing Studies released its annual State of the Nation’s Housing report. Its findings show even more disparities in homeownership:

  • Despite the housing rebound in many parts of the nation, minority and low-income neighborhoods remain severely distressed.
  • As of 2014, the homeownership rate for minorities as a group remains 25.5 percentage points lower than that of whites.
  • More than 40 percent of Hispanic and Black households with mortgages report paying interest rates above 5 percent, compared with less than a third of white and Asian/ other minority households.

“All of these findings along with rising home prices mean that consumers who want to buy their first home, face tremendous hurdles,” concluded Corbett. “It is time to make mortgage access more available and more equal.”

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