Minority Real Estate Trade Association urges policymakers to tackle down payment assistance, loan level pricing adjustments, student loan debt and valuation bias
WASHINGTON, DC, USA, February 28, 2022 /EINPresswire.com/ — With the property gap between black and white families wider today than when housing discrimination was rampant decades ago, the National Association of Realtors (NAREB) is launching a “Revive the American Dream of Homeownership” campaign to change public policies that limit the ability of low-to-moderate income families to buy homes.
Last summer, the homeownership rate for blacks was 44.6% compared to 74.2% for whites, a difference of 29.6%. In 1960, before the enactment of civil rights and fair housing laws, there was a 27-point lower gap between black homeownership (38%) and white homeownership (65%), which demonstrates the substantial need for policies that support home ownership.
“It’s a travesty that in 2022, some five decades after the civil rights movement, there has been very little progress in black homeownership,” said Lydia Pope, president of NAREB. “It is time for us to act. We need to alert Congress and the Biden administration that public policies need to be enacted and changed to provide more opportunities for families to buy homes. The American dream of home ownership needs to be revived.
Specifically, NAREB targets four policy areas that they have identified as detrimental to home buying for minorities and low-to-moderate income families:
Down payment assistance. NAREB fully supports the down payment relief plan under President Biden’s Legislation to Build Back Better. Currently, there are down payment assistance options available to families, but most come with strings attached that may affect their ability to get a home loan. For example, some programs add a second mortgage or stricter salary and credit score requirements. Other proposals want to tie down payment assistance to a tax credit, but this type of relief does little to help a family who cannot close their home because they cannot afford the down payment. NAREB supports a grant program for down payment assistance so that participation does not impact the ability to qualify for a mortgage.
Student loan debt. Four years after graduating from college, black people owe an average of $25,000 more in student debt than their white counterparts, and black people leave school with an average of $52,726 in student debt, according to Brookings. Institution. Student loan debt affects black people’s ability to buy homes. One of the biggest issues is the inconsistency in determining how student loan debt is calculated in the mortgage underwriting process debt ratios. Essentially, while future debt is taken into account, expected future salary increases are not. There has been some progress with Fannie and Freddie acknowledging income-based payment plans that reduce monthly debt ratio calculations, but that does nothing to address the fact that real student loan debt continues to rise. . While NAREB strongly supports proposals that eliminate some student debt, it is essential that a uniform standard be created that guides the Federal Housing Administration, Fannie Mae, Freddie Mac and the Veterans Administration in calculating debt so that not be left to the lenders.
Loan Level Price Adjustments (LLPA). A depth study by the Journal of Financial Economics found that equivalent-risk Latinx/Black borrowers pay significantly higher interest rates on GSE-securitized and FHA-insured loans, especially in minority neighborhoods. The researchers estimate that these rate differences cost minority borrowers more than $450 million a year. The LLPAs are the culprits. Even if someone qualifies for a loan, lenders are allowed to adjust the interest rate based on credit scores. Additionally, private mortgage insurance companies also increase their mortgage insurance rates based on credit scores. Thus, the consumer may be hit twice by higher rates, creating price increases that may push potential buyers out of the market. NAREB is seeking an end to LLPAs and wants it to be established that if a family qualifies for a mortgage, they get the loan at no additional cost.
Fair assessments. NAREB wants to end valuation bias when black people sell their homes or need an appraisal on new ones. There is a growing tendency to move away from physical assessments to rely on technology. But this is inconvenient because the data entered into any program may already be biased. A Brookings Institution study shows that homes in black neighborhoods are 23% lower in value than similar homes in white neighborhoods. A 2021 Redfin study found that homes in black neighborhoods are undervalued by $46,000 on average, a consistent gap over the past decade. Furthermore, the assessment review process is deeply flawed. When an appraisal is disputed, the onus is on the real estate agent or lender to provide data to support a change in appraisal. But this rarely happens – less than 3% of reviews are reviewed. NAREB wants a revamped assessment review process. Additionally, NAREB is calling on the public and private sectors to help increase the number of black evaluators. There are 78,000 reviewers across the country, but only 2% are black.
“By addressing these public policy issues, we can create an environment that will give more black families the opportunity to own property,” said Ashley Thomas III, NAREB’s second vice president, who is leading the campaign. “These policy changes must be part of Reckoning on Race. It is shameful that there are policies that limit progress.
ABOUT THE NATIONAL ASSOCIATION OF REAL ESTATE BROKERS
NAREB was established in 1947 to ensure the right to equal housing opportunity regardless of race, creed or color. NAREB has advocated for legislation and supported or initiated legal challenges that ensure fair housing, sustainable homeownership, and access to credit for Black Americans. Simultaneously, NAREB advocates and promotes access to business opportunities for Black real estate professionals in each of the real estate disciplines.