The National Association of Realtors is calling for Congress to enact a $10 billion down payment assistance program for first generation home buyers. In addition, the Federal Housing Finance Agency released the long-awaited Deprived Markets Plan 2022-2024 that includes financing for manufactured housing, rural housing, and the preservation of affordable housing.
The brokers’ initiative comes as part of efforts to address decades of housing discrimination that has prevented blacks and other minorities from becoming homeowners and building intergenerational wealth.
When passing the original Rebuilding Better Act, HR 5376, the House included the Down Payment Assistance Program. But now, with the Senate shrinking legislation to attract the support needed to pass the reconciliation process, NAREB believes it’s critical that the down payment assistance provisions remain in the bill.
“For decades, black families and other families of color have been victims of housing discrimination that has prevented them from reaping the intergenerational benefits of home ownership,” said Lydia Pope, president of NAREB. As a result, many black families were unable to pass the homes down from generation to generation in their families, creating wealth that could be used for down payments. This is why this legislation is so important. It helps correct the ship and put black families on the path to home ownership and wealth building.”
NAREB points to research showing that black families lack financing for down payments because widespread housing discrimination over decades has limited the accumulation of wealth between generations that could save money to cover initial costs when buying a home.
Data shows that more than half of the US homes on the market are affordable for families who earn at least $100,000 a year. However, only 20% of black families nationwide reach this income threshold.
Additionally, NAREB claims that government policies have played a major role in limiting black ownership and wealth. For example, government-backed mortgages were the main driver of middle-class wealth. However, the FHA was “blatantly racist” in its mortgage insurance program. From 1934 to 1968, 98% of all FHA loans went to white families. Furthermore, if one black family lived in a neighborhood where the buyer sought a mortgage, the FHA financing was denied.
NAREB cites the Urban Institute, which says the $80 billion down payment assistance program could provide more than 5 million families with a down payment of $15,000 to buy a home. Black, white, and Latino families will be eligible. However, smaller annual budgets will be required for newly qualified applicants in the coming years.
Much of this research is supported by the annual NAREB Report on the State of Housing in Black America (SHIBA), which details the state of black home ownership in the United States, as the report’s key findings show:
- For black applicants, the combined traditional and nontraditional rejection rates for home purchase loans were more than double those of white applicants—16% versus 7%.
- Credit history is the second most common reason for rejection among black (25%) and white (19%) applicants.
- Overall, black applicants experienced a loan creation failure rate of 35%, compared to a white applicant rate of 23%.
Despite the federal government’s lazy attitude toward the low rate of home ownership for blacks, some agencies seem to be waking up to the issue. On April 27, the FHFA published Deprived Markets Plans 2022-2024 for Fannie Mae and Freddie Mac (the companies) under the Duty to Service Program.
Plans for 2022-2024 also include increasing the Low Income Housing Tax Credit (LIHTC) and equity investment in LIHTC properties – with a focus on rural areas. Both Fannie and Freddie saw their maximum annual investment in LIHTC shares increase last fall from $500 million to $850 million annually. The Housing and Economic Recovery Act of 2008 provides for duty-of-service provisions.
“Providing sustainable liquidity to maintain safe and sound affordable housing, rural housing, and manufactured housing is an integral part of corporate responsibility to serve underserved markets,” said Sandra L. Thompson, Acting Director of FHFA. “The additional activities and objectives to be implemented under these plans are important steps towards companies fulfilling their duty to serve their mandate over the coming years.”