Bank of America said it is now offering first-time homebuyers in a select group of cities zero down payment, zero closing cost mortgages to help grow homeownership among Black and Hispanic/Latino communities.
via: BET
The trial program seeks to close the minority homeownership gap by eliminating some of those obstacles, even as the mortgage industry is plagued with practices that discriminate against minorities.
Under the program, the bank will base loan decisions on the borrowers’ history of making timely payments of rent, utilities, auto-insurance and phone bills. BofA is going beyond credit scores so
“people can use other mechanisms to define their creditworthiness, buy a home and build their wealth,” AJ Barkley, BOA’s head of neighborhood and community lending, told Bloomberg.
BofA’s process includes borrowers obtaining U.S. Housing and Urban Development (HUD) certification and counseling to qualify. “We will qualify applicants to confirm they have demonstrated an ability to repay,” Barkley added. “What we don’t want to do with this program is place people in homes they cannot stay in.”
The real estate industry has a long history of racial discrimination. A HUD report found that the nation’s lenders extended subprime loans in predominantly Black neighborhoods five times more than in white communities. In 1998, these high-cost mortgages accounted for 51 percent of loans to Black homeowners compared to just 9 percent to white homeowners.
Homeownership rates surged in 2020, but disparities remained. For white Americans, the homeownership rate is about 72 percent. The rate is about 61 percent for Asians, 51 percent for Hispanics and 43 percent for Blacks, KXAS reports, citing National Association of Realtors data.
A Bloomberg News analysis published in March uncovered a significant racial disparity in refinancing approval rates between Black and white homeowners in 2020 at Wells Fargo, the nation’s third largest commercial bank.
Wells Fargo had the biggest disparity in a banking system that already rejects more Black homeowner applications than it approves. It approved only 47 percent of Black homeowners’ refinance applications but 72 percent of applications from whites.
The bank has refuted Bloomberg’s analysis, saying that it “ignored critical information known to the authors” about Wells Fargo’s record of lending in the Black community.
In July, a Pennsylvania mortgage company owned by billionaire Warren Buffett’s Berkshire Hathaway Inc., reached a $24 million settlement to resolve federal charges of intentionally discriminating against Black and Latino homebuyers in Philadelphia, New Jersey and Delaware.
Trident Mortgage’s discriminatory practices is the second largest redlining settlement in the nation’s history, the Department of Justice said. Redlining is the discriminatory practice of systematic preventing people from buying homes in certain areas, based on their race, ethnicity or religion.
Under the settlement, Trident did not admit or deny wrongdoing.
BofA’s program is currently available in Dallas, Detroit, Los Angeles, Miami and Charlotte, N.C.
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