Homeownership is considered by many to be a rite of passage and a crucial component of the American Dream, but for many in the Black community, that dream is being deferred.
According to the 2016 State of Housing in Black America report by the National Association of Real Estate Brokers (NAREB) — which was created in 1947 to secure equal housing opportunities for people of all races — homeownership rates in 2014 stood at 41.2 percent among Blacks, compared with 68.5 percent among non-Hispanic whites.
Numbers from the U.S. Census Bureau show the rate of Black homeownership is the lowest it’s been since discrimination was legal, which is concerning for community leaders.
“Homeownership has become an indispensable part of being a full participant in American society,” National Urban League President and CEO Marc H. Morial said. “An erosion of homeownership rates among African-Americans represents not only a devastating financial loss but a barrier to full participation in the American dream.”
The NAREB report cites many reasons for the disparity, including how credit scores are tabulated, lenders’ hesitancy to extend credit to borrowers with lower credit and lower down payments, a lack of affordable housing inventory and the lack of exposure to long-term homeownership, among many others.
To begin chipping away at the disparity, NAREB — along with the NAACP and the National Urban League — are partnering with Wells Fargo, which has pledged $60 billion in lending and set a goal of creating 250,000 African-American homeowners by 2027.
NAREB President Ron Cooper said the program is “a solid and meaningful start for more Black Americans to become homeowners and wealth-builders.”
“The bank is the first financial institution to acknowledge publicly Black Americans’ wealth-building potential which could be greatly improved through homeownership,” Cooper said in a statement.
Wells Fargo has a spotty history when it comes to its dealings with minority communities. In just one recent case, the New York Times reports, “An investigation by the DOJ’s civil rights division found that mortgage brokers working with Wells Fargo had charged higher fees and rates to more than 30,000 minority borrowers across the country than they had to white borrowers who posed the same credit risk.
“Wells Fargo brokers also steered more than 4,000 minority borrowers into costlier subprime mortgages when white borrowers with similar credit risk profiles had received regular loans.”
Wells Fargo has also been named in complaints alleging discriminatory practices in the maintenance of foreclosed properties.
Amy Nelson, executive director of the Fair Housing Center of Central Indiana, said she can’t speak for Wells Fargo or about this program specifically, but some programs like this one are prompted by settlements related to fair housing complaints.
“There have been some other lenders that, as part of settlement agreements, have agreed to put money back into neighborhoods that have been impacted by what occurred or by trying to increase homeownership to persons of color as a result of what occurred,” Nelson said.
The Recorder reached out to Wells Fargo for more details about what prompted the creation of the program, and whether it was part of a complaint settlement. A spokeswoman said:
“Wells Fargo made its announcement last week as a direct action to positively impact the declining homeownership rate among African-Americans. Currently it’s 42 percent and represents the lowest homeownership rate among ethnic minorities.”
Demystifying the process
Locally, two women — mortgage specialist Diana Rice-Wilkerson and Janis Bradley, who owns JB Real Estate Consultants — are working to address the issue in more ways than one. Both women are board members of the Central Indiana Realtist Association (CIRA), the local arm of the NAREB, and they host The Home & Finance Show on WTLC 1310-AM, which is focused on demystifying the home buying process.
Rice-Wilkerson said the Wells Fargo program sounds positive on the surface, but she’s more concerned with the lender’s long-term practices.
“I’m more interested in, what about your guidelines — which now have people denied who shouldn’t be — are you going to change those so you can get more credit-worthy people into homeownership?”
Bradley voiced similar concerns.
“What strings are you loosening up to help people get into homes? The key is for them to be able to stay in the house. … How is it helping them get and stay in the home?”
Rice-Wilkerson said she’d like to see lenders be more forthcoming with information for potential borrowers, especially those who are denied. She said many potential homebuyers aren’t aware that each lending institution has its own set of requirements — called an overlay — so when their application is rejected at one bank and they’re not told why, they might assume they’re ineligible everywhere.
“I can live with that if, when the lender denies the borrower, they specifically indicated the reason they were denied was because of their overlay,” she said. “We just need to have the information so we can make good decisions.”
Bradley said misinformation keeps some potential homebuyers from beginning the process at all.
“People hear horror stories and don’t really know the facts. What they hear most of the time is that they have to put down 20 percent, because that’s what you hear on TV,” she said. “People think they need excellent credit. … Sometimes our clients think they have challenged credit and end up not having an issue at all.”
Rice-Wilkerson said some popular credit monitoring tools, such as Credit Karma, can skew people’s view of what constitutes a sufficient credit score.
“If you pull up your credit scores on Credit Karma, it could have a 670 or 680. They consider that a fair credit score, which is really not true in the mortgage industry,” she said. “When we see a 660, we’re excited. I think a lot of information that’s out there is bogus; it’s not the complete story.”
Another misconception, Bradley said, is the idea that it’s always cheaper to rent than to buy. People also wrongly think a past bankruptcy or foreclosure disqualifies them from buying a home for several years or indefinitely.
“Those are the things we’re trying to get out, to let them know that there is light at the end of the tunnel.”
The Home & Finance Show airs on WTLC 1310-AM on the first, second and third Saturdays of the month from 1–2 p.m. Find more information at homeandfinanceshow.com.