A sale sign is posted outside a house in Seattle, Washington.
David Ryder | Bloomberg | Getty Images
The early days of Guadalupe Mora’s search for a new home were exhausting.
As a health technician at a Department of Veterans Affairs hospital, Mora slowly saved more than $ 15,000 to move out of her two-bedroom mobile home to a new location she’d chosen with her real estate agent.
But the lender she first contacted began stalking her day and night, urging her to demand more cash and other evidence that she would be able to repay a loan.
A single mother of a 12-year-old who “thinks she knows everything,” Mora said the lender’s agents would bother her with messages even if she made it clear she couldn’t return texts at work.
“It was seriously so stressful. It was horrible,” she told CNBC during her lunch break last week. “I work 12-hour shifts. I cannot – especially when I work in the Covid unit – not make constant calls.”
The lender “just didn’t understand that I knew I needed the house – and I wanted the house. But I had to keep my job to buy the house,” she added.
When Mora finally applied for a mortgage with Chase Bank, the 45-year-old learned she had qualified for the $ 2,500 Homebuyer Grant, one of the bank’s programs designed to help customers finance their home purchases.
The grant is just one of several support options US banks have used in recent years to promote home ownership in black and Latin American communities that have historically faced higher mortgage application hurdles.
To further this goal, Chase Bank announced Tuesday that it would double its Chase Homebuyer Grant.
Chase, JPMorgan Chase’s US consumer and commercial banking business, said qualified shoppers in mostly black neighborhoods across the country can now receive a $ 5,000 grant when buying a home through the bank.
While this sum can be a fraction of the price of a home, it can help cover a significant 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 increase the homebuyer grant comes a little more than four months after the bank announced it would commit $ 30 billion to eradicate inequality in US wealth, particularly in historically underserved black and Latin American communities.
The bank pledged to use the $ 30 billion to fund an additional 100,000 affordable housing units and to write 40,000 new home loans for black and Latin American households.
Still, proponents of housing construction say that after decades of redlining, the subprime mortgage crisis, and risky high-yield loans to Americans with short or troubled credit histories, banking programs are overdue.
Many banks announced their new mortgage assistance programs in the months following the death of George Floyd on May 25 through a police officer and weeks of protests across the country against Black Lives Matter.
The level of black home ownership is particularly low and is consistently behind that of other minority groups and white households.
In the first quarter of 2020, 44% of black families owned their homes, compared to 73.7% of non-Hispanic white families, according to the Census Bureau. By the fourth quarter, that difference had widened slightly to 44.1% for black families and to 74.5% for white families.
In black households, the home ownership rate fell to 40.6% in 2019. This was the lowest value for the population that can be traced back to the 1994 census data.
Although black home ownership has recovered somewhat since then, the effects of Covid-19 and the ensuing recession have continued to depress the pressure on black home ownership in 2020.
Cerita Battles, Chase community leader and affordable credit team, told CNBC that lenders need to play a proactive role in reducing these disparities.
“Absolutely yes. We should be part of the solution,” Battles said on Thursday.
“I think of myself as someone who is black,” she continued. “There were times when I bought my first house – I couldn’t go to my parents and ask them for dollars to help me with my down payment. And I didn’t initially have many wealthy jobs that I had because of the difference and how I had to get up. “
Battles said she and her husband, who is a veteran, received a significant portion of the funds to buy their first home through a Department of Veterans Affairs-backed loan. Banks often offer cheaper loan terms to applicants who qualify for a VA loan as the department guarantees part of the mortgage.
Similar initiatives are under way at Bank of America, which announced on February 3 that it would be investing $ 15 billion in affordable housing programs over the next five years, tripling its commitment to date.
Steve Boland, president of BofA’s retail business, told CNBC at the time that demand for its initial $ 5 billion pledge was so robust that applicants quickly exhausted the allotment.
“We see the need. We have had a great response from our customers, so we felt it was appropriate to triple this and have 60,000 homeowners by 2025,” he said.
Build trust again
Although the industry has received praise for its attempts to prioritize home ownership among minority communities, the programs follow after years of stakeholder criticism that large banks have for decades exacerbated racial discrimination in the US real estate market.
The codified racial bias in the US real estate market dates back nearly a century when government officials were openly involved in a practice known as redlining.
Beginning in the 1930s, surveyors sketched and rated neighborhoods in hundreds of U.S. cities to determine which were safe enough for funding. Communities with more colored people were more likely to be classified as credit risk and broadly denied a variety of financial services, including mortgages.
Although Congress banned redlining in the 1960s, recent housing research shows that the troubled relationship between the black community and the credit industry was strained well into the 21st century.
In the early 2000s, black households were disproportionately burdened with delicate subprime loans, resulting in the foreclosure of more than 240,000 black-owned homes and a foreclosure rate almost twice that of whites.
A sale sign can be seen outside a home when the National Association of Realtors released a report showing that home sales declined in December 2017 on January 24, 2018 in Miami, Florida.
Joe Raedle | Getty Images
In a 2016 complaint, the U.S. Bureau of Consumer Financial Protection alleged that BancorpSouth had illegally denied black applicants in Memphis certain mortgage loans and overwhelmed some of its black customers.
The complaint alleged that the bank had required its employees to consider applications from minorities faster than others and not to give them the opportunity to receive loan assistance that would have improved their chances of getting a loan.
A recent study from the University of California at Berkeley found that black and Latin American applicants continue to face higher borrowing costs.
The 2019 study, which examined 7 million 30-year mortgages, found that Black and Latino borrowers “earned 0.079% and 0.036% percentage points more interest on home purchases and mortgage refinances due to discrimination, respectively numbers”.
Lenders claim that these differences reflect the fact that minorities generally have less cash and lower credit scores. Critics argue that the differences represent historical and structural problems that banks should help solve.
Acknowledging this tumultuous story, Battles said an important first step in correcting home ownership statistics is trying to ensure that the black and Latin American communities are aware of the new financial services that are available to them.
“I would say there are a lot of different things lenders can do to support this effort,” Battles said. And that, she said, start with building trust in each community.
“We need to make sure we hire people who reflect the markets we want to serve,” she added. “It’s important for us to make sure we have people who can nurture relationships and gain the trust and consideration of these customers and these communities.”
Marcia Hernandez, who just got married in August, says her long history as a Chase customer was crucial when she and her partner Vivian looked for a new home in a quieter neighborhood in the Miami area.
“I’ve had Chase for years and I started my lending first,” she said. “I did a bit of further training online and at the end submitted a prequalification. I received a call the same day.”
The 31-year-old says she worked with a home loan advisor at Chase to determine an appropriate budget and resources available to her. Although Hernandez was initially not eligible for a grant, a representative from the bank recently announced that she had received the new $ 5,000 grant.
“I was dreaming,” she said when asked about the scholarship. “It saved me from worrying in the future. I was shocked. I couldn’t believe it.”
“It opened up space for other projects,” she added.
Hernandez, who is due to close her house on Tuesday, said she was keen to repaint the walls and add plants to her new home.