Why do Black and Brown borrowers have such a small share of the Fannie Mae and Freddie Mac loan portfolio?

In 2020, 3.06% of loans purchased by Fannie Mae were for Black borrowers and 8.03% were Hispanic borrowers. In comparison, 65.61 % were for white borrowers1. For Freddie Mac in 2020, 3.28% of loans purchased were to Black borrowers and 6.77% to Hispanic borrowers. Compare that to 64.62% of loans were for white borrowers2. This poor performance with Black and Hispanic borrowers is an ongoing problem in meeting an important market opportunity and addressing the racial homeownership gap.  Compare these numbers with FHA-insured mortgages, wherein 2020, 12.74% of FHA loans went to Black borrowers, 17.29% of loans went to Hispanic borrowers and 50.11% went to white  borrowers3. Fannie Mae and Freddie Mac do not do a good job lending to people with lower downpayments and lower credit scores. But Black and Brown borrowers are more likely than white borrowers to have a lower downpayment and a lower credit score.  Black and Brown borrowers coming from lower wealth communities are not be able to save as many funds for a downpayment. Their families are typically lower in wealth and have less ability to gift downpayment contributions to help with the purchase. They are also more likely to be rent-burdened, paying a higher proportion of their income for rent and, as a result, having greater difficulty saving downpayment funds.   At the same time, Fannie Mae and Freddie maintain very high credit score averages. The average credit score in the Fannie Mae portfolio is 7514. For Freddie Mac, the average credit score is 7595. Compare that to the average credit score of Black households, which is 677, and for Hispanic households, 701. White average credit scores are 7346. Over 50% of white people have FICO scores above [...]

NHRC Celebrates 9 Years of Service

Can you believe it? NHRC is nine years old! It seems like only yesterday that NHRC was a brand-new baby and look where we are now.  It has been quite a year: We pushed for $100 Million in new funding for housing counseling in the American Rescue Plan, which is now the Housing Stability Counseling Program administered by NeighborWorks America. No final number on the FY 2022 budget yet, but the House has put us in for the full $100 million for the HUD Housing Counseling assistance that we requested.  We continue to encourage the Senate to do the same. Our contributions to Maxine Waters’ staff and the Black Homeownership Collaborative are paying off with the likely inclusion of a first-generation homebuyer down payment assistance program in the latest budget reconciliation bill.  We should know shortly. We continue to advocate for the Eviction Crisis Act, the Disaster Recovery Act, and Housing Financial Literacy Act, along with a role for housing counseling in these bills. We have kept the pace up on our Leaders in Housing Counseling calls; the latest on eviction protection, forbearance, and foreclosure prevention, manufactured housing, thinking about systemic racism, student loans, Black and Brown homeownership preservation, and more. We have pivoted our outreach work with local housing counseling agencies to do virtual events on home buying and homeowner preservation. We continue to progress on standardizing housing counseling data fields, so our work can communicate electronically with Fannie Mae, Freddie Mac, lenders, servicers, and HUD (shout out to David Young on his leadership). Our significant discount for Credit Reports for NHRC members and the SAVI student loan program continues. We are making the voices of housing counseling heard in the public arena and [...]

Prioritizing First Time Homebuyers

As we look forward to recognizing National Homeownership Month this year (June 2021), we cannot ignore the issues that plague potential first-time homebuyers across the country. First-time homebuyers of modest means who need a mortgage to purchase a home face stiff competition from cash buyers and well-funded investors in the current market and are being blocked from achieving homeownership in many ways.   The National Association of Realtors reported in April 2021 that 25% of all home sales were all-cash deals, which has increased from 15% reported in 2020. Investors and cash buyers are pushing consumers with a modest income and owner-occupant buyers out of the market.  This disproportionately impacts buyers of color and first-time homebuyers. By purchasing moderately priced homes through all-cash deals, buyers are artificially inflating the real estate market and aiding in gentrification in many neighborhoods across the country.  Investors are also turning owner-occupied single-family homes into non-owner-occupied rentals which diminish the sense of community many first-time homebuyers look for when seeking their dream home.  These issues are hitting all over the U.S. in both rural and urban areas. Housing counselors and advocates for affordable housing began raising the alarm about this issue in early 2020.  Real estate agents were telling homebuyers to waive property inspections and even appraisal contingencies to be competitive.  Buyers were told that cash offers with quick turnaround were beating out their offers (sometimes even for lower amounts).  Private equity companies were bidding up single-family home prices to switch homes to long-term rentals – fueled by Wall Street investors. On behalf of American for Financial Reform, National Housing Resource Center (NHRC) convened a working group that identified five specific areas to address: Incentives for selling to first-time buyers/owner-occupants Amassing [...]

The Black Homeownership Collaborative Plan for Three Million New Black Households by 2030

Black homeownership has plummeted since the Great Recession.   Systemic racism, equity stripping, and a significant loss of affordable housing are just a few reasons for this declination in Black homeowners throughout the US.   The National Housing Resource Center has joined with the National Housing Conference, the National Association of Real Estate Brokers, the National Fair Housing Alliance many other organizations working collaboratively through the Black Homeownership Collaborative to ensure that there are 3 million new Black homeowners by the year 2030.  To do this, a 7-point plan has been devised that will address several key areas that have caused Black homeownership to continually plummet since the end of the Great Recession. Over one hundred housing leaders that span the political spectrum in areas of housing advocacy and industry recommend seven “tangible, actionable, and scalable” steps that will aid in addressing the gap in housing disparities between Black and white homeowners.  As this is just the beginning in bringing Black homeownership to “levels never previously attained”, they are assured that these steps will lead to new strategies as this plan unfolds. The National Housing Resource Center (NHRC), HomeFree-USA, and NeighborWorks America co-chaired the Downpayment Assistance and the Housing Counseling Workstreams.   To read this plan in detail, click here. Homeownership Counseling – Providing homeownership counseling helps to close the gap in many of these areas by getting much-needed information to would be Black homebuyers.  The plan calls for sustained funding for housing counseling and strategies to get homebuyers and homeowners to housing counseling programs early in the process. Downpayment Assistance – Discriminatory housing policies and growing racial wealth gaps play a major role in many Black and Brown families not having much needed resources to save for [...]

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