In the the midst of deadening inflation—the kind that has left one in six American homes, some 20 million households, unable to pay utility bills, according to one report—there is finally some good news to report. And it’s in that other part of the economic picture that’s just as grim as inflation: housing. Bank of America announced on Tuesday that it is testing out a new home lending program for first-time homebuyers that will allow them to purchase a home with no money down and no closing costs, building on the company’s already existing partnership with the Neighborhood Assistance Corporation of America.
The new program is specifically focusing on Black and Latino communities in Charlotte, North Carolina; Dallas; Detroit; Los Angeles; and Miami. They are communities hit especially hard by former President Donald Trump's indifference to discriminatory mortgage lending practices. But count on his supporters to scream reverse racism for any effort to shrink the wealth gap between Black people and white people.
RELATED STORY: Discrimination in mortgage lending persists due to Trump. Now Biden's working to combat it
A Twitter user who goes by Paul Szypula condemned the program for, as he put it, "discriminating against white people." "Will (President Joe) Biden's DOJ prosecute BofA for this clear case of race discrimination?" Szypula asked.
I haven’t asked the White House, but I’m going to go out on a limb and say that’s a hard no.
Brittany Packnett Cunningham, a social justice activist, explained exactly why Szypula's assertion is flawed. In short: because he has no idea what he's talking about. "For the record, it’s not ‘race based,’ it’s neighborhood based," Cunningham tweeted.
Cunningham also highlighted concerns about the program raised by Black social media users. “Home ownership absolutely needs to be made WAY more accessible but…I got questions about that interest rate???” she said. “Black and Latiné folks with memories of the sub-prime crisis got MANY reasons not to trust BoA”
The corporation was found liable in 2013 for having sold billions of dollars in “defective mortgages” and was allowed to settle in a civil case for $16.65 billion.
RELATED STORY: Bill Black’s takedown of DoJ’s captured behavior as they tout “prosecutions” of BofA, JPMC
The company didn’t respond immediately to Daily Kos’ question regarding how interest rates offered to those who qualify for the program would compare to a market average of rates.
Democrat Johnny Akzam also tweeted a warning related to the cost of borrowing. “But watch out for the interest folks,” he wrote. “If you're paying 5% more for the home over 30 years, then Bank of America will be making more money on the backend. All corporate decisions revolve around their profit margin. Read the fine print.”
AJ Barkley, who heads neighborhood and community lending for Bank of America, said in a news release that the program dubbed the Community Affordable Loan Solution is part of the company's broader commitment to the communities it is serving.
“Homeownership strengthens our communities and can help individuals and families to build wealth over time,” Barkley said.
The program allows people to use elements of their financial histories other than credit scores to prove their creditworthiness like “rent, utility bill, phone and auto insurance payments,” according to Bank of America.
"It requires no mortgage insurance or minimum credit score," the company reported. "Individual eligibility is based on income and home location.
“Prospective buyers must complete a homebuyer certification course provided by select Bank of America and HUD-approved housing counseling partners prior to application."
Bert Ferguson, a realtor based in Delaware, highlighted a potential negative of the program by noting that if the real estate market were to take a downward turn, homeowners with little to no equity may not be motivated to continue paying back their loans. "People may walk away from a property saying, 'hey look, I don't have much equity anyway. I'll just go through a foreclosure,’" Ferguson said.
He asked Bank of America to "vet who they do this program with very very closely" to avoid attracting scammers. But if the program is handled properly and expanded, Ferguson said it could be a “beautiful situation.”
"My opinion is I think that this is needed," he said.
The homeownership gap between white and Black households expanded in 2020 during the COVID-19 pandemic, the National Association of Realtors reported. "As 2020 was one of the best years for the housing market, the U.S. homeownership rate climbed to 65.5%, up 1.3% from 2019," the association reported. "Although the homeownership rate for Black Americans also increased to 43.3%, it is still lower than a decade ago.”
That’s not true for white, Asian, or Hispanic Americans, all groups that saw “decade long highs in homeownership in 2020,” the realtors association reported, noting that the home ownership rate for Hispanic Americans reached 50% for the first time.
”Although mortgage rates dropped below 3% in 2020, not everyone had the same opportunities to get a home loan and benefit from these low rates,” the realtors group said. “Data shows that Black home buyers and owners face extra challenges in getting a mortgage.”
Chief among them were denial rates to purchase and refinance loans. “According to our analysis, Black applicants are twice as likely to be denied for a mortgage compared to their White counterparts,” the realtors association reported. “While the main reason a mortgage lender rejected their application is the debt-to-income ratio, Black home buyers reported that they also were rejected due to a low credit score.”
Now, white households are 40% more likely to be able to afford a home than Black households, according to the realtors’ association.
I must admit I have a clear bias in favor of home ownership, especially when there is a thoughtful solution raised to make it more accessible to Black communities.
RELATED STORY: On my way to being a first-time homebuyer in Georgia: Here's how I won the contract in a wild market
I’m just as leery of interest rates as the next person, but the most important factors in my own home-buying journey were what my home was worth and whether I could afford the monthly payments with other living expenses. I benefitted from a low-downpayment loan and a reasonable interest rate, but I had to be realistic. I wasn’t going to get free money, and it would have taken me far longer to purchase a house outright, which is the only way to avoid all interest fees.
In the meantime, I would’ve been subjected to the volatility of renting—definitely the less preferred option, in my case.
Donate now to strengthen our majority in the Senate!
Abortion rights, climate change, and gun safety are all on the ballot this fall, and there are literally thousands of ways to get involved in turning our voters. Plug into a federal, state, or local campaign from our GOTV feed at Mobilize and help Democrats and progressives win in November.
RELATED STORIES:
Lawsuit: In two years, this bank granted mortgages to only 37 Black borrowers
Wells Fargo is back with even more abuse for would-be customers
Despite outstanding rating, banks still aren’t lending to black business owners like they should be