Lending Focus

Citi (C) is the latest big bank to take steps aimed at making homeownership a more equitable process. Last week it announced a new set of programs that will look to make its lending products more accessible within diverse communities. Called HomeRun, one such initiative is mortgages with down payments as low as 3% – without purchase money insurance required.

Earlier this month, Bank of America (BAC) announced a similar program offering mortgages with zero down payment requirements. The company noted the goal is to help boost home ownership rates among Black and Latino families. It’s a trial program that will focus on select neighborhoods in Charlotte, Dallas, Detroit, Miami, and Los Angeles.

Overcoming Obstacles

The US Census Bureau says the national Black homeownership rate came in at 45% this year, which is 30% lower than the rate observed for white families. Some industry observers contend banks have contributed to this gap historically, by approving fewer loans with less favorable terms. This has allegedly proven true even when white and Black applicants have similar jobs and credit scores.

Even recent data points to a potentially problematic situation. Bloomberg News conducted an analysis of federal mortgage data in 2020 and found Wells Fargo (WFC) approved 72% of all white homeowners’ applications to refinance loans, compared to just 47% of all Black homeowner’s applications. Broadly speaking this all falls in line with the term “redlining” which applies to the historical tendency for minority communities to face difficulty when applying for mortgages.

Potential Impact

There’s optimism among experts and scholars that programs such as the ones being rolled out by Bank of America and Citi can make a difference. Chris Herbert manages the Joint Center for Housing Studies at Harvard University called these types of plans significant. He told the New York Times (NYT) that for low and middle-income families saving up enough cash for a down payment is a “big barrier.”

Since it’s a pilot program focusing on specific neighborhoods there will be an acute need to track the data and see what sort of impact is being made. With home prices at all time highs and mortgage rates on the rise, many families could stand to benefit.

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