A ‘Sold’ sign sits outside a home in Seattle, Washington.
David Ryder | Bloomberg | fake images
The first days of Guadalupe Mora’s search for a new home were exhausting.
Mora, a health care technician at a Department of Veterans Affairs hospital, slowly saved more than $ 15,000 to move from her two-bedroom mobile home to a new location she chose with her real estate agent.
But the lender she had first contacted began harassing her day and night, pressuring her with demands for more cash and other evidence that she could repay a loan.
Mora, a single mother of a 12-year-old boy who “thinks she knows everything,” said that the lender’s agents harassed her with messages even when she made it clear that she couldn’t return text messages while at work.
“It was, seriously, very stressful. It was horrible,” he told CNBC last week during his lunch break. “I work 12-hour shifts. I can’t, especially when I work in the Covid unit, it’s impossible for me to be on my phone constantly.”
The lender “just didn’t understand that I knew I needed the house, and I wanted the house. But I needed to keep my job in order to buy the house,” he added.
So when Mora finally applied for a mortgage through Chase Bank, the 45-year-old learned that she qualified for its $ 2,500 Homebuyer Grant, one of the bank’s programs designed to help clients finance the buying a house.
The grant is just one of several assistance options that US banks have implemented in recent years to encourage home ownership among Black and Latino communities that have historically faced the greatest hurdles in applying for a mortgage.
To further advance that goal, Chase Bank announced Tuesday that it will double its Chase Homebuyer Grant.
Chase, JPMorgan Chase’s U.S. consumer and commercial banking business, said that qualified homebuyers in predominantly black neighborhoods across the country can now receive a $ 5,000 grant when purchasing a home through the bank. .
While that sum may represent a fraction of the price of a home, it can help cover a substantial portion of an applicant’s down payment or closing costs, often the biggest hurdles for new home buyers.
‘Part of the solution’
Chase’s move to boost the Homebuyer’s Grant comes just over four months after the bank said it was pledging to commit $ 30 billion to help address wealth inequality in America, especially in communities. Historically neglected blacks and Latinas.
The bank pledged to use the $ 30 billion to finance 100,000 additional affordable housing units and issue 40,000 new home purchase loans for Black and Latino households.
Still, housing advocates say banking programs are behind after decades of red lines, the subprime mortgage crisis and risky high-interest loans for Americans with short or clouded credit histories.
Many banks announced their new mortgage assistance programs in the months after George Floyd’s death on May 25 at the hands of a police officer and weeks of Black Lives Matter protests across the country.
Blacks’ homeownership levels are especially low and have consistently lagged those of other minority groups and white households.
In the first quarter of 2020, 44% of black families owned their home, compared to 73.7% of non-Hispanic white families, according to data from the Census Bureau. By the fourth quarter, that difference had widened slightly to 44.1% for black families and 74.5% for white families.
Black households saw homeownership rates fall to 40.6% in 2019, the lowest level for the demographic group since 1994 census data.
Although black homeownership has recovered somewhat since then, the impact of Covid-19 and the subsequent recession kept downward pressure on the black homeownership rate during 2020.
Cerita Battles, director of Chase’s community and affordable lending team, told CNBC that she believes lenders must play a proactive role in working to reduce those disparities.
“Absolutely yes. We should be part of the solution,” Battles said Thursday.
“I think of myself, being someone black,” she continued. “There were times when I bought my first home; I couldn’t go to my parents and ask them for dollars to support my down payment. And I didn’t have a lot of wealth to begin with because of the different jobs I had and how I had to get by.”
Battles said that she and her husband, who is a veteran, received a significant portion of the funds to purchase their first home through a loan backed by the Department of Veterans Affairs. Banks often offer more favorable credit terms to applicants who qualify for a VA loan, as the department guarantees a portion of the mortgage.
Similar initiatives are underway at Bank of America, which announced on February 3 that it would invest $ 15 billion in affordable housing programs over the next five years, tripling its previous commitment.
Steve Boland, president of BofA’s retail business, told CNBC at the time that demand for its initial $ 5 billion pledge was so strong that applicants had quickly exhausted the allocation.
“We see the need. We got a great response from our customers. So we thought it was appropriate to try to triple that and get 60,000 homeowners by 2025,” he said.
Rebuilding trust
Although the industry has received praise for its attempts to prioritize homeownership among minority communities, the programs come after years of criticism from advocacy groups who say that big banks over decades worsened racial profiling in the US housing market. U.S.
Codified racial prejudice in the US housing market dates back nearly a century, when government officials openly engaged in a practice known as the red line.
Beginning in the 1930s, surveyors would delineate and rate neighborhoods in hundreds of American cities to determine which ones were safe enough to finance. Communities that included more people of color were more often seen as credit risk and, by extension, denied a variety of financial services, including mortgages.
Although Congress banned red lines in the 1960s, recent housing research shows that the uneasy relationship between the black community and the lending industry was strained well into the 21st century.
In the early 2000s, black households were disproportionately targeted with sub-prime loans, leading to the foreclosure of more than 240,000 black-owned homes and a foreclosure rate nearly double that of blacks. white.
A for sale sign is seen in front of a home when the National Association of Realtors released a report showing that home sales fell in December 2017 on January 24, 2018 in Miami, Florida.
Joe Raedle | fake images
In a 2016 complaint, the U.S. Consumer Financial Protection Bureau alleged that BancorpSouth illegally denied black applicants in the Memphis area certain home loans and overcharged some of its black clients.
The lawsuit claimed that the bank required its employees to review minority applications more quickly than others and did not provide them with the opportunity to receive credit assistance that might have improved their chances of obtaining a loan.
A more recent study from the University of California at Berkeley found that black and Latino applicants continue to face higher loan costs.
The 2019 study, which reviewed 7 million 30-year mortgages, found that Latino and black borrowers “pay 0.079% and 0.036% more percentage points in interest on home purchases and mortgage refinancing, respectively, due to discrimination. “.
Lenders contend that these differences reflect the fact that minorities generally have less cash on hand and lower credit scores. Critics argue that the disparities represent historical and structural problems that banks should help solve.
Acknowledging that troubled history, Battles said a key first step in correcting homeownership statistics is trying to ensure that Black and Latino communities are aware of the new financial services available to them.
“There are many different things, I would say, that lenders can do to support this effort,” Battles said. And that, he said, begins with building trust in each community.
“We have to make sure we hire people who reflect the markets we are looking to serve,” he added. “It’s important to us to make sure we have people who can cultivate relationships and earn the trust and consideration of these clients and these communities.”
Marcia Hernández, newly married in August, says her years of history as a Chase client were key when she and her partner, Vivian, began looking for a new home in a quieter neighborhood in the Miami area.
“For years I have had Chase and I started with my loans,” he said. “I educated myself a bit more online and ended up submitting a prequalification and got a call the same day.”
The 31-year-old says she worked with a Chase home loan counselor to determine a reasonable budget and the resources available to her. Although Hernandez was not eligible for a grant initially, a representative from the bank said he recently told her that they had awarded her her new $ 5,000 grant.
“I daydreamed,” she said when asked about the grant. “It protected me from worrying in the future. It surprised me. I couldn’t believe it.”
“It opened space for other projects,” he added.
Hernandez, who is scheduled to close her home Tuesday, said she is eager to repaint the walls and add plants to her new home.