Tackling Racial Inequities in Homeownership

The Urban Institute's recent landscape analysis of the racial homeownership gap - A Landscape Scan of Homeownership for Households of Color (November 2022) - found that households of color have lower homeownership rates than white households. While reasons for these racial disparities vary, "they are often attributable to differences in households’ access to financial resources and persistent racial discrimination."

On October 4, 2023, the Urban Institute and Living Cities held a conference to explore how homeownership could be made more equitable for everyone. Living Cities "is a collaborative of 19 of the world’s largest foundations and financial institutions working to close racial income and wealth gaps in American cities."

At the conference, local and federal government leaders discussed systemic inequity in homeownership for people of color and various innovative solutions to close these persistent homeownership gaps. Especially highlighted were the local homeownership initiatives currently being done by cities in the "Closing the Gaps’ Year of Reckoning Cohort" and existent racial equity plans by federal agencies.

While racial disparities in homeownership persist, institutions such as Fannie Mae and Freddie Mac, the U.S. Department of Housing and Urban Development (HUD), and state and local governments are working to achieve greater racial equity in U.S. homeownership. 

Barriers to Homeownership Equity

One conference focus was a panel focused specifically on federal barriers to homeownership for nonwhite communities. Participants included Katrina Jones, vice president of racial equity strategy and impact at Fannie Mae; Demetria McCain, principal deputy assistant secretary for fair housing and equal opportunity at HUD; Pamela Perry, vice president of single-family equitable housing at Freddie Mac; and Rekha Balu, director of federal equity initiatives at the Urban Institute.

Saving the funds needed to close on a single-family home is a major impediment for prospective first-time homebuyers in communities of color. This challenge stems from historic wealth inequities that diminish generational wealth.  Additional obstacles to equity include insufficient access to credit disproportionately impacting Black and Latino families and high rental housing costs sap families' efforts to save money toward a downpayment. Most renters' on-time rental payments are not reported to credit bureaus, reducing their credit scores and lessening their ability to qualify for a mortgage at a favorable rate. One solution could be to increase an applicant's credit score by 60 points and make them eligible for prime financing rather than a subprime loan.

Even among homeowners, inequities persist.  A homeowner's race often affects assessments of home values is attested by the approximately 200 active appraisal discrimination cases HUD is managing. Scammers have targeted communities, such as Black and Caribbean homeowners in New York, and defrauded them out of their titles, according to HUD. 

Possible Solutions to Inequity

Important solutions proposed included: 

(1) Efforts to bridge the gap between aggregate and abstract data and families’ on-the-ground, anecdotal experiences. Jones described efforts at Fannie Mae to create fictional personas to illustrate the specific barriers different groups of people face in their journeys toward homeownership; these personas, created from housing data and research reports, help make housing challenges more comprehensible and less abstract. The personas give researchers at Fannie Mae analytic clarity to better understand how different groups’ challenges in the journey to homeownership intersect and differ. According to Jones, this approach offers a powerful way to bridge the gap between individual experience and aggregate data to drive tailored policy changes through the organization’s Equitable Housing Finance Plan.

(2) The panelists pointed out that real estate professionals can also make improvements. For example, diversifying the home appraisal industry can help reduce racial appraisal gaps. Perry described a partnership among Fannie Mae, Freddie Mac, and the Appraisal Institute (a professional organization that educates, credentials, and develops ethical standards for real estate appraisers) to hold recruiting events and increase scholarship and mentorship opportunities to diversify the profession. McCain added that Mississippi, which had scored poorly on a national assessment of diversity among home appraisers, responded by creating a program to recruit and train a more diverse cohort of appraisers.

(3) Special purpose credit programs, which target credit to historically underserved communities and communities living with the legacies of past discrimination, can also help alleviate homeownership inequities. McCain stated that HUD has found that special purpose credit programs for real estate loans or credit assistance are permissible and has advocated for their expansion to help promote homeownership equity. Perry pointed out that the U.S. has historically promoted homeownership through generous mortgage programs, noting that in the 1950s, many white families took advantage of favorable lending terms that facilitated first-time home purchases - opportunities denied to families of color, which has contributed to the inequities of the present. Jones added that similar credit programs today that require lower downpayments or offer homeownership counseling remain useful tools for promoting homeownership, this time for those who had previously been excluded.

(4) A sustained focus on identifying barriers to homeownership and a commitment to implementing solutions are showing how organizations can help homebuyers overcome longstanding housing inequities. The ongoing challenge, said panelists, is bringing these and other solutions to maturity and to scale. 

Read the November 14, 2023 PD&R Edge article.

 

 KeyBank Provided Less Loans to Black And Low-Income Homebuyers in 2022

A National Community Reinvestment Coalition (NCRC) analysis of the most recent federal data on mortgage lending has found that Black borrowers were 2.6% of the Cleveland-based bank’s home purchase mortgage lending in 2022, down from 3% in 2021. KeyBank has provided fewer percentage of its loans to Blacks each year since 2018, when 6.5% were to Blacks.

In 2022, KeyBank made 19.2% of its home purchase loans to low- and moderate-income (LMI) borrowers, down from 19.7% in 2021. In 2018 more than 38% of such KeyBank loans went to an LMI borrower. Other top lenders made more than 30% of their 2022 purchase mortgages to LMI borrowers and about 7% of them to Black borrowers. 

This performance by KeyBank is "counter to the spirit of the agreement it made with community leaders while seeking clearance for a merger in 2016," as a report NCRC published last year documented. From 2018 to 2022, the Bank's executives hiked shareholder dividends using the new profits from the merger. NCRC's 2022 report detailed KeyBank’s failure in serving low and moderate-income (LMI) and Black borrowers within the communities it pledged to assist. KeyBank in 2016 signed a Community Benefits Agreement (CBA) with the NCRC and various community groups representing those same borrowers’ interests across the U.S. The deal was instrumental in satisfying legal and regulatory requirements in KeyBank’s merger with First Niagara Bank.  

By 2021, KeyBank had become the worst major mortgage lender for Black borrowers. NCRC cut ties with KeyBank after discovering the bank’s lower performance regarding Black and LMI borrowers, and notified regulators that the bank should receive a downgraded Community Reinvestment Act rating. The Bank first released "misleading and inaccurate responses asserting it had not done what the numbers show, it was later forced to commission a racial equity audit once shareholders applied pressure."

Read the November 9, 2023 NCRC article.

 New Report On Federal Home Loan Banks Released

A new federal report FHLBank System at 100: Focusing on the Future assessing the Federal Home Loan Bank (FHLB) system will help the public and policymakers achieve effective reforms to improve the FHLBs’ future performance. The Federal Home Loan Bank System has been a key component of the nation’s housing finance system since it was created over 90 years ago. Today, the Federal Home Loan Banks (FHLBanks) connect domestic financial institutions - many of which are small, community focused lenders - to the global capital markets. Those connections make it possible for lenders to better support housing and community development. 

The Report recommends that: (1) The role of the FHLBanks in providing secured advances must be distinguished from the Federal Reserve’s financing facilities, set up to provide emergency financing for financial institutions with immediate liquidity challenges. The FHLBank System does not have the functional capacity to serve as the lender of last resort for troubled members. (2) FHLBanks should coordinate with their members’ primary regulators and the Federal Reserve Banks to make sure their members’ borrowing needs continue to be met when they no longer satisfy the FHLBanks’ credit criteria. (3) FHLBanks also should regularly update their credit evaluations of their members to avoid encouraging excessive risk taking. 

Additional steps that will better enable the FHLBanks to perform their liquidity function include: (i) improving the ability of the FHLBanks to maintain interest-bearing deposits with commercial banks to manage intra-day liquidity requests; (ii) limiting the potential for an increase in debt issuance costs for all members following a large liquidity request from a single member; and (iii) strengthening capital management and stress testing to keep the FHLBanks able to serve their members through all economic environments.

FHFA seeks to help the Federal Home Loan Bank System continue being a source of stable and reliable liquidity, while increasing support for housing and community development. The report summarizes issues raised throughout the initiative, actions FHFA will take, and recommendations, some of which are for consideration by Congress. 

FHFA will further review these issues and do the recommendations through ongoing supervision, guidance, or rulemaking. Much of this work will involve additional collaboration and communication with stakeholders. Certain recommendations require statutory changes, which in turn require coordination with, and support from, Congress.

The new report was produced with input from stakeholders including NCRC. FHFA started its review of the FHLBs in 2022, to identify how it could modernize the FHLB system and better serve the public. NCRC has called for reforms to strengthen community-based accountability, increase affordable housing resources, and further fair housing. The recommended changes would also more effectively support Community Development Finance Institutions (CDFIs) as well as important community development investments in climate resilience and other projects. 

Read the November 8, 2023 NCRC release.

 Push for Fair Housing Education on November 14th

The National Community Reinvestment Coalition (NCRC) and the U.S. Department of Housing and Urban Development (HUD) have teamed up for a social media campaign to raise awareness of housing discrimination and highlight the importance of fair housing across the country.    NCRC will lead a #FairHousingMatters #WelcomeME Social Storm on November 14, all day across all platforms, to spark wider public interest in fair housing.    Here is a toolkit with sample graphics and social posts to help you post during the social storm.   The Fair Housing Act prohibits discrimination in the sale, rental, or financing of dwellings and other housing-related activities because of race, color, religion, sex (including sexual orientation and gender identity), national origin, familial status, or disability. If you or someone you know has experienced housing discrimination, please contact @NCRC immediately for assistance. #fairhousingmatters #welcomeme https://www.ncrc.org/fh/

 CFPB Sues Repeat Offender Freedom Mortgage Corporation for Providing False Information to Federal Regulators

The Consumer Financial Protection Bureau (CFPB) filed a lawsuit in federal court on October 10, 2023, alleging that Freedom Mortgage Corporation submitted legally-required mortgage loan data that was riddled with errors. The CFPB alleges that Freedom’s practices violate both the Home Mortgage Disclosure Act (HMDA) and a 2019 consent order. In a recent separate matter, in August 2023 the CFPB fined Freedom $1.75 million for paying illegal kickbacks for mortgage loan referrals. 

Freedom is a privately held nonbank mortgage loan originator and servicer with headquarters in Boca Raton, Florida. In 2020, Freedom reported HMDA data on more than 700,000 mortgage loan applications and originated nearly 400,000 HMDA-reportable loans worth almost $100 billion. Under HMDA, mortgage lenders are required to report information about loan applications and originations to the CFPB and other federal regulators. The public and regulators can use HMDA information to assess if the financial institutions are serving the housing needs of their communities, and to identify possible discrimination.

In 2019, the CFPB found that Freedom had intentionally misreported HMDA data about applicants’ race and ethnicity. For example, certain loan officers were told by managers or other loan officers that when applicants did not provide their race or ethnicity, they should select non-Hispanic white. The 2019 order required Freedom to pay a $1.75 million penalty, improve its compliance management system, and avoid future HMDA violations.

The 2023 lawsuit alleges that the HMDA data Freedom submitted for 2020 contained widespread errors across multiple data fields, and that the errors constitute violations of HMDA, the Consumer Financial Protection Act, and the 2019 order. Specifically, the CFPB alleges: (1) Freedom reported information to regulators with widespread inaccuracies: After the CFPB found 51 errors in an initial review of 159 files in Freedom’s 2020 submission, the company had to resubmit its data. In that resubmission, Freedom corrected errors in 35 different required HMDA data fields. There were errors in over 174,000 data entries affecting nearly 20% of Freedom’s mortgage loan applications; and (2) Freedom violated a 2019 law enforcement order to clean up its deficient data practices. It has failed to do this, and has continued to provide federal regulators with error-ridden data.

Under the Consumer Financial Protection Act (CFPA), the CFPB has the authority to take action against financial institutions violating consumer financial laws, including HMDA. The lawsuit seeks to stop Freedom’s alleged unlawful conduct and for it to pay a civil money penalty which will be deposited in the CFPB’s victims relief fund. 

Read today’s complaint.

Read the October 10, 2023 CFPB release.

 CFPB Orders Citi to Pay $25.9 Million for Illegal Discrimination Against Armenian Americans

The Consumer Financial Protection Bureau (CFPB) has ordered Citi to pay $25.9 million in fines and consumer redress for intentionally and illegally discriminating against credit card applicants the bank identified as Armenian American. From 2015-2021, Citi rejected applicants for certain credit card products, based on their surnames, whom it suspected of being of Armenian descent. Citi supervisors hid the discrimination by instructing employees not to discuss the discrimination in writing or on recorded phone lines. Citi employees also lied about the basis of denial, providing false reasons to denied applicants. Under the order, Citi will pay $1.4 million to harmed consumers and a $24.5 million penalty.

Citibank, N.A. is a national bank headquartered in New York City that issues consumer credit cards, including retail services credit cards for companies like Home Depot and Best Buy. Citi’s parent company is Citigroup (NYSE: C), a global financial services holding company. As of June 30, 2023, Citi had $1.7 trillion in total assets – making it the third-largest bank by asset size in the U.S.

In essence, Citi treated Armenian Americans as criminals who were likely to commit fraud. From at least 2015 through 2021, Citi identified retail services credit card applicants with surnames that Citi employees associated with Armenian national origin as well as applicants in or around Glendale, California. The bank specifically targeted surnames ending in “-ian” and “-yan.” Nicknamed “Little Armenia,” Glendale has approximately 15% of the Armenian American population.

Intentionally denying credit based on national origin is illegal under the Equal Credit Opportunity Act.  Specifically, Citi harmed consumers by:

• Denying credit applications because of borrowers’ ancestry: Citi’s supervisors taught employees how to discriminate against people of perceived Armenian descent using surname suffixes. When Citi identified applicants as possibly having Armenian national origin using this method, the bank used more stringent criteria to evaluate their applications, including denying them totally and requiring additional information or blocking the account. 
• Giving borrowers fake reasons for credit denials: When Citi denied credit applications because of applicants’ perceived Armenian national origin, Citi employees lied about the specific reasons for the adverse actions. For example, a Citi employee explained it had been a while since they had discriminated against a perceived Armenian, and wanted to learn how to cover up the discrimination. S/he was told to decline the credit card application due to suspected credit abuse, which essentially blamed the applicant for the denial.

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial protection laws, including the Equal Credit Opportunity Act and its implementing Regulation B. 

The CFPB’s order requires Citi to: (1) pay $1.4 million to affected consumers: Consumers who applied for a Citi Retail Services Credit Card between January 1, 2015, and December 31, 2021, and are identified as having been denied the credit card based on national origin discrimination are eligible for redress; and pay a $24.5 million fine to the CFPB’s victims relief fund.

Read today’s order.

Consent Order 

Stipulation 

Read the November 8, 2023 CFPB release.

View case filings

PUSH FOR BALTIMORE INCLUSIONARY HOUSING LEGISLATION CONTINUES

The Baltimore Inclusionary Housing Coalition is continuing to lobby for a vote on a Baltimore City Council bill that would require affordable housing units to be created in certain residential projects. There are more than 20 organizations in the Coalition, which has been working on the inclusionary housing bill since before the 2007 expiration of an inclusionary housing policy. 

The nonpartisan Coalition was formed by the Baltimore Branch of the NAACP, Baltimore Renters United, Beyond the Boundaries, BRIDGE Maryland, Inc., Citizens Planning and Housing Association (CPHA), Community Development Network, SEIU 1199, and the Public Justice Center (PJC), among numerous other Baltimore area nonprofit and community organizations, volunteers, and City Councilwoman Odette Ramos (District 14).

Council Bill 22-0195 is one of the two bills the coalition is advocating for. It would “eliminate the loopholes and waivers in the prior inclusionary housing law that made it a failure,” according to a webpage by the League of Women Voters of Baltimore City, a member of the coalition. The bill would require developers to set aside 10 percent of units as affordable housing in residential projects that receive city funding or rezoning and have greater than 20 units. Affordable is defined as a household earning less than 60% of Area Median Income (about $55,740 for a family of two) would pay rent that is no more than 30% of their income. 

Courtney Jenkins, President of the Metropolitan Baltimore AFL-CIO, has said that with the average cost of housing in the City being around $1,200 monthly, renters are paying about $15,000 yearly on housing. Since 54% of Baltimoreans make less than $60,000 annually, housing costs are at least 25% of their income, if not more, he said. The National Equity Analysis estimates that more than 20,000 households in Baltimore City are behind on rent. Lack of access to affordable housing and an overabundance of inadequate housing especially hits people of color.

There have been five hearings and 30 amendments to CB 22-0195 since its introduction in February 2022. The Coalition deplored the fact that the proposed law has not yet been brought before the full council for a vote. “I think any other amendments are active[ly] delaying this even further,” said Loraine Arikat, a member of the 1199SEIU Maryland/DC division, a union that represents healthcare workers. Once the law is passed, it will not go into effect immediately. The proposed law grants a six-month grace period before it goes into effect. That buffer gives time to gather advisory board appointees.  

The Historic Sharp Leadenhall Community Association agrees with the Coalition that something has to be done immediately: “We cannot continue to have families not have decent shelter. We cannot continue not to have access to affordable food. We cannot continue to accept this as a people.”

The last inclusionary housing policy was passed in 2007 and expired in June 2022, according to an inclusionary housing study commissioned by the Baltimore City Department of Housing & Community Development and completed by Enterprise Community Partners. That policy solely led to the development of 34 affordable housing units due to loopholes and waivers. City Council President Nick Mosby  said the proposed CB 22-0195 must create as many inclusionary housing units as possible across the whole city. At a Coalition rally, He said, “No matter your ZIP code, your socioeconomic status, new buildings - new quality buildings with affordable units - should be able to be available to you. You should have quality development in communities that you’re most comfortable with, that you have cultural competency with, and that you wanna grow and stay growing in age in.” 

In 2021, Mosby introduced a legislative package “House Baltimore” to provide low-income residents with opportunities to buy and rehabilitate existing Baltimore homes. Advocates heavily criticized it, and he apologized after a hearing to discuss the bill ended chaotically.

Ramos has said she understands activists’ impatience but wants the bill to be done correctly. Although she said the bill has support from the Council, as of today there is not a date set for the vote.  

If approved, C 22-0195 will create an advisory board that must approve the developers’ plans before they can obtain a permit. The advisory board will ensure the enforcement of the program. Members will be appointed by Mayor Brandon Scott, according to Matt Hill, an attorney for the Public Justice Center, a legal advocacy group and coalition member. Developers would not receive their subsidy until after completing the reporting procedures required by the bill. This is to make sure that too much subsidy might be going to the developers. The coalition will likely make recommendations for the board to the mayor, Hill said.

Another City Council bill, CB 23-0369, is coupled with the inclusionary housing policy to create a high-performance inclusionary housing tax credit. The tax credit would give eligible property owners a 15% abatement of city property tax. 

For more information and to support the proposed law, the public can go to the Action Network's dedicated page.

Read the November 3, 2023 Baltimore Beat article.