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Housing Access and Affordability
Thirty-two years after the passage of the 1968 Civil Rights
Act outlawing discrimination in the sale or rental of housing,
members of Congress, the Administration and the general public
still find it necessary to debate the issue of equal access
to homeownership for all citizens.
In September 1999, the U.S. Department of Housing and Urban
Development (HUD) released a study entitled, "What We Know
About Mortgage Lending." Sadly, it finds that discrimination
still exists. In response to the release of the study, HUD Secretary
Andrew Cuomo is quoted as saying, "This is … shocking
to me. Discrimination is not just alive and well, it's flourishing.
That's the sorry truth."
The report found that in 1998 African Americans were denied
mortgages 217 percent as often as white applicants. This is
up from 206 percent in 1995 and 209 percent in 1997. Hispanic
applicants also fared poorly with 184 percent denial of mortgages
over white applicants in 1998. This is up from 169 percent in
1995 and 181 percent in 1997.
After reviewing this study, President Clinton has asked for
$50 million in the federal budget for HUD's Fair Housing and
Equal Opportunity Office for fiscal year 2001. Home ownership
is still just a dream in many communities of color. The Washington
Post has reported that 72.3 percent of white families own their
own homes, as compared with 45.8 percent of African American
families and 44.9 percent of Hispanic families.
The HUD study offers a rationale for why this is such a burning
concern for advocates for the poor and low-income persons. The
document states that: "Owning a home in a neighborhood
of one's choice is a major aspect of the American dream. Owning
a home is one of the primary ways of accumulating wealth in
our society. There is also evidence that -- by creating a greater
stake in the neighborhood -- homeownership increases a people's
willingness to invest in community problem solving. And homeownership
is even known to increase people's overall sense of well-being.
Yet not all Americans enjoy equal access to the benefits of
homeownership, in part because of unequal access to capital.
Minorities are less likely than whites to obtain mortgage financing
and, if successful in obtaining a mortgage, tend to receive
less generous loan amounts and terms."
The study listed three major findings:
1. Discrimination can begin at the early stages of the mortgage
lending process, including pre-application inquiries by would
be borrowers.
This analysis reviewed results from HUD-funded "paired
testing" that was carried out in selected cities. Testers
of different races, who were matched on credit history and
other traits, approached lenders with the same types of mortgage
needs. Overall, minorities were less likely to receive information
about loan products, received less time and information from
loan officers, and were quoted higher interest rates in most
of the cities where tests were conducted.
2. At later stages of the process, racial disparities in
loan denial rates cannot be "explained away" by
differences in creditworthiness or by technical factors affecting
the analyses.
Statistical re-analysis of data assembled by the Federal
Reserve Bank of Boston (data that include measures of creditworthiness
and other important factors) finds large differences cannot
be explained away by data or statistical problems asserted
by prior critics of the Boston study. This analysis presents
substantial evidence that discrimination exists, shifting
the "burden of proof" to those who would argue that
these differences are entirely due to racially neutral underwriting
criteria.
3. Good intentions -- on the part of lenders -- are not enough.
In-depth examination of the mortgage loan origination process
from an individual lender's perspective suggests that even
among institutions with good intentions, and where loan officers
take pride in working with borrowers who need more help on
loan applications, minority customers may not be receiving
equal treatment. The evidence on organizational change suggests
that achieving significant reductions in lending discrimination
may require such changes in business practices as: "improving
employee awareness of and attitudes toward fair lending obligations;
making the 'business case' for fair lending and its importance
to the firm; implementing clear incentives that support change;
monitoring employee performance on fair lending; tackling
underwriting standards that have disproportionate, negative
effects on minorities but serve no clear business purposes;
and more."
HUD does not present these findings without giving recommendations
regarding how they can be remedied. Measurable next steps to
end mortgage discrimination include:
- Expanded research on lender decisions about office locations,
advertising and outreach, and referrals that may discourage
minorities from ever applying for loans with some institutions;
- Stepped-up testing at the pre-application stage and possibly
the loan approval stage as well, for research, enforcement,
and self-assessment by lenders themselves;
- Replication and enhancement of the methodology employed
by the Boston Fed in new, nationwide studies of mortgage lending,
including systematic analysis of mortgage loan performance
to determine the "business necessity" of lending
criteria and procedures that disproportionately disadvantages
minorities;
- Expanded research on loan terms and conditions, including
objective examination of relatively recent market trends such
as risk-based pricing and credit-scoring formulas, as well
as analysis of overages and fees; and
- Rigorous evaluation of fair lending "best practices"
to find out what really works to increase lending to traditionally
under served groups.
Only months after the release of this report on lending, HUD
also released a scathing report detailing the apparent discriminatory
practices of Freddie Mac and Fannie Mae lending institutions.
They were each chartered by Congress to buy home loans from
banks and other lenders to ensure a plentiful supply of mortgage
money in the nation. In exchange for the right to be called
a government-sponsored organization, they were to lead the mortgage
industry in meeting the needs of under served populations. The
fact that they have not done this has left African Americans
vulnerable to higher cost loans or unable to secure any loans
at all. This later report shows that our policy makers need
to once again turn major attention to the continuing discrimination
in housing.
New Legislation
Rep. Rick A. Lazio (R-NY) has introduced HR 1776, entitled
the American Homeownership and Economic Opportunity Act. The
bill has an impressive level of bipartisan support. The House
Housing and Community Opportunity Subcommittee held hearings
on this bill in September last year.
Sponsors of the bill acknowledge that priorities should include
expanding home ownership opportunities by providing access to
affordable housing that is safe, clean and healthy. The U.S.
has an abundance of conventional capital sources available for
home ownership financing. Experience with local home ownership
programs has shown that if flexible capital sources are available,
communities possess ample will and creativity to provide opportunities
uniquely designed to assist their citizens in realizing the
American dream of home ownership.
The purpose of HR 1776 is to facilitate home ownership by families
in the United States who are not otherwise able to afford home
ownership; and to expand home ownership through policies that:
- Promote the ability of the private sector to produce affordable
housing without excessive government regulation;
- Encourage tax incentives, such as the mortgage interest
deduction, at all levels of government; and
- Facilitate the availability of flexible capital for home
ownership opportunities and provide local governments with
increased flexibility under existing federal programs to encourage
ownership.
Section 8 Homeownership Option
It is often the down payment that is the major stumbling block
to many families who seek homeownership. This bill proposes
that a public housing agency may, in lieu of providing monthly
Section 8 public assistance payments, at its own discretion,
provide assistance for a family by a contribution toward the
down payment required to purchase a home. This would be a single
grant within a fiscal year and could not exceed the amount that
is equal to the sum of the assistance payments that would normally
be made during the first year of the families assistance. The
housing down payment amount would be based on the income level
of the recipient.
Help for Municipal Employees
Section 203 of this bill is called the "Neighborhood Teachers
Act," which recognizes the importance of teachers as an
integral part of our communities. The values that teachers can
bring to community and family life can be encouraged by rewarding
them with a 50 percent discount for purchasing properties that
are seen as the eligible assets of that community.
The bill has not overlooked other municipal employees. Section
403 of the bill calls for an amendment to the Housing and Community
Development Act of 1974 that would provide direct assistance
to facilitate and expand homeownership among uniformed employees
such as police, fire, sanitation and maintenance workers of
the metropolitan, city or urban county that may receive these
grant monies. In order to qualify, the family income must not
exceed 115 percent of the median income of the area involved,
with adjustment made for the size of the family.
Concerns With the Bill
Notwithstanding some of the good points of the bill, HUD and
other public policy advocates have raised questions about the
direction of the bill and some of its proposals. They oppose
HR 1776 because it changes the targeting guidelines for both
HOME and Community Development Block Grants (CDBG). William
Apgar, HUD Assistant Secretary and Federal Housing Commissioner,
at a House hearing testified: "I believe that all funds
should continue to be targeted to those families most in need--
households earning 80 percent or less of median income. HR 1776
would effectively take these limited funds away from needy families,
by raising income limits to 115 percent of area median income."
This is a legitimate concern. By raising the threshold, more
families, including those who are employed as uniform workers
of the municipality, would not qualify for a mortgage. Apgar
also raised concerns about the deeply discounted price of HUD-owned
property to local government or others, because this could result
in the loss of more than $3 billion in FHA funds from the Single
Family inventory holdings of the FHA. It is feared that this
would do more to decrease the possibilities of homeownership
for the poor and low income because it could reduce the numbers
of eligible properties.
Suggested actions:
- Contact your senators and representative and urge them not
to approve the negative aspects of this bill, such as the
115 percent level of income needed to qualify for a mortgage.
Addresses:
The Honorable
US House of Representatives
Washington, DC 20515
The Honorable
US Senate
Washington, DC 20510
- Follow the HUD web page for more programmatic and community
offerings where your church can partner with local, state
and federal government on issues of housing discrimination
and availability. The HUD internet site is located at www.hud.gov.
Some other web sites that might be of interest to advocates
for fair and open housing:
· National Low-Income Housing Coalition
www.nlihc.org
· National Community Reinvestment Coalition
www.ncrc.org
· Leadership Conference on Civil Rights
www.civilrights.org
· National Fair Housing Advocate Online
www.fairhousing.com
- Check how your state approaches the sale and resale of housing
stock to low-income families. For more information, visit
the web site of the National Council of State Housing Agencies
at www.ncsha.org.
General Assembly guidance:
The 200th General Assembly (1988) called on the church to renounce
"the discriminatory practices that so imprison us and others
in racially 'apartheid' residential communities and repent of
our failure as property owners, real estate agents, neighbors,
and mortgage lenders, to promote the principle and practice
of fair housing."
The 200th Assembly also called upon the federal and state governments
to "promote meaningful initiatives to create and sustain
more open and integrated housing patterns through genuine affirmative
marketing and other efforts to expand homeowners' options by
the Department of Housing and Urban Development, state and local
governments, school districts, nonprofit agencies, and the housing
and lending industries."
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