Wealth Gap Widening as Black America Is Left Out of Real Estate Recovery

National Association of Real Estate Brokers (NAREB) and thought leaders sound alarm at Congressional Black Caucus Foundation (CBCF) Annual Legislative Conference

Washington, DC – September 29, 2015 – Statistics, issued recently by the Home Mortgage Disclosure Act (HMDA) indicate that in 2014, only 5.2 percent of mortgage loans were made to Black borrowers at a time when the homeownership rate for the Black population had already fallen from nearly 50 percent in 2004 to its current low of 43 percent.

The failure of financial firms to originate home loans to Blacks, the consequent continuing fall in homeownership rate if this trend is not reversed, solutions to jumpstart affordable and sustainable mortgage lending to Black Americans, and the important wealth-building potential of increasing the Black homeownership rate, were subjects of a Forum hosted by the National Association of Real Estate Brokers (NAREB) held during the Congressional Black Caucus Foundation (CBCF) Annual Legislative Conference recently convened in Washington, DC. Forum attendees heard expert panelists present and discuss the key factors contributing to the downward homeownership rate for Black households which now stands at its lowest level in 20 years and is projected to continue to fall.

“NAREB is drawing back the curtains and shining a spotlight on unequal access to mortgage credit to the Black community. Economic recovery has definitely not reached the majority of Black Americans. As a result, the real estate recovery is not real for Black America,” said Ron Cooper, President NAREB the country’s oldest, minority real estate trade association formed in 1947. Cooper’s remarks directly responded to NAREB’s Forum title, “Real Estate Recovery 2015: Is it REAL for Black America?”

The Forum, sponsored in part by the Federal Home Loan Bank of San Francisco (FHLBSF) brought together real estate practitioners, housing advocates, mortgage loan analysts and thought leaders to present viable options to increase homeownership for Black Americans. Congressional host, U.S. Representative Gregory Meeks (D-NY) said his 5 ^th District was one of the hardest hit by the housing crisis but “comprehensive housing finance reform hasn’t happened and it doesn’t look like it’s going to” in this Congress. Congressman Meeks spoke of the value of the government-backed housing agencies, Fannie Mae and Freddie Mac, which provide the largest number of home loans to our nation’s homebuyers. He stressed in his remarks that we need those agencies to do a better job of lending to Black families. But rather than improving their outreach to Black America, he warned the audience about the conservative Congress’ proposals to eliminate federal support for these entities.

Mark Alston, Forum moderator and chair of NAREB’s Public Affairs Committee, set the tone of the two-hour session in his opening remarks saying that “systemic disparities in access to the mortgage financing system have significantly dimmed the prospects for a recovery in homeownership among Black Americans. Mr. Alston noted that if current barriers to access are not removed, homeownership for Black Americans will continue to fall in spite of the overall housing recovery. The loss of wealth in Black America as a result of this situation is staggering.”

Forum panelists presented their expert perspectives, historical background and solutions to address and reverse the seemingly intractable falling homeownership trend. Unanimously, Forum panelists called upon Congress to address immediately, disparities in mortgage lending practices that are contributing to the increasing racial wealth gap and slowing economic growth for the entire nation.

Maurice Jourdain-Earl , Managing Director, ComplianceTech said Blacks still face challenges that limit their ability to secure mortgage loan applications, let alone loans. He said that redlining is still a major problem. Majority Black areas in America do not have an adequate access to credit.

Moreover, he said, when Black Americans do receive loans they are disproportionately of the higher cost variety, that is, subprime or loans backed by the Federal Housing Administration (FHA); not conventional prime loans which Fannie Mae and Freddie Mac buys. His statistics showed that from 2004 to 2013, of the 43.7 million home loans Whites received, 83.50 percent were conventional loans, of which, 9.5 percent were subprime loans, and 16.50 percent were government-backed loans. Comparatively, during the same period, of the 3.2 million home loans Black Americans received, 70.85 percent were conventional loans, 36 percent were subprime loans, and 29.15 percent were government loans. To the question is the Real Estate Recovery Real for Black Americans, Jourdain-Earl said “the data says no.”

Lisa Rice, executive vice president, National Fair Housing Alliance illustrated how the discriminatory effects of age-old bank redlining practices persist and are still having an adverse impact on communities of color using Cleveland, OH as a model. The areas where predatory subprime mortgage loans to Blacks were concentrated are the same areas that were hardest hit by the foreclosure crisis during the most recent economic meltdown. The Alliance’s research also shows that the housing stock in communities of color is being gobbled up investors and today, those neighborhoods are quickly gentrifying. She pointed out how credit scoring mechanisms produce disparate and unreliable negative outcomes for borrowers of color and discussed how all these issues contribute to the widening wealth gap in America.

Timothy L. Simons, vice president and senior compliance officer of the Federal Home Loan Bank of San Francisco, said “Homeownership must be affirmed as a principal ladder for upward mobility for working families and for community stability.” Simons recommended that going forward Congress “mandate a mission of universal access to low cost mortgage credit for all communities.”

Keith Corbett, executive vice president of the Center for Responsible Lending which offers specialized programs for nontraditional and first-time borrowers, said “we know that affordable lending works.” One fix Congress could make Corbett said, is not to mandate down payments from borrowers.

James H. Carr , senior fellow at the Center for American Progress summarized panelist presentations by stating that, “the future wealth of America largely hinges on the extent to which people of color are able to succeed in this economy.”  And he noted that homeownership is the single most important source of wealth building. But he stated that the doors to homeownership are currently all but closed for Blacks and that no legislation is pending before Congress that would meaningfully improve access to mortgage credit. In fact, Carr stated that there are ways to significantly improve access to credit for people of color that could be implemented virtually overnight, but are not being implemented. Carr cited a study by the credit scoring company VantageScore that estimates that using their more updated and predictive credit scoring models could increase mortgage lending to Blacks and Latinos by as much as 30 percent each year.

NAREB President Ron Cooper called upon NAREB’s members to continue their support of Fannie Mae and Freddie Mac, and charged them to lobby for policies and practices that will help create two million more Black homeowners in the next 5 years . Cooper stated that plans about NAREB’s campaign launch to reach the two million homeowners goal are expected to be released later this fall.

The National Association of Real Estate Brokers (NAREB) was formed in 1947 out of a need to secure the right to equal housing opportunities, regardless of race, creed, or color. Since its inception, NAREB has initiated and promoted meaningful challenges and supported legislative initiatives to ensure fair housing for all Americans. www.nareb.com .

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