With the country still awash in rage and tears and blood following George Floyd’s murder by Minneapolis police on May 25, America may have finally been bludgeoned into acknowledging that systemic racism in the U.S. is an atrocity, one that must finally be brought to an end. But human beings have never proven themselves adept at making large-scale, structural changes. For all our feelings of superiority toward the rest of the planet’s species, we’ve never actually been very good at changing the systems we ourselves have created.
Contrary to the hopes of millions of people around the world, a single, bomb-like erasure of systemic racism is not going to happen. Eliminating it will require a disciplined, multi-front attack on numerous targets, one where individuals and associations can focus their efforts on a specific area – one chink in the armour – and make their blows count.
Concerned mortgage professionals should already have a target in their sights: a black homeownership rate that is no better today than it was before fair housing legislation was passed in 1968. But according to CBC Mortgage Agency head of government affairs Tai Christensen, the problem dates back much further, to 1619, when African Americans, then property themselves, were put to work creating generational wealth for slave owners.
“They were able to continue to amass property, to amass wealth and pass that wealth from generation to generation,” Christensen says. “And black folks, as a whole, still have not caught up from that time period. We’re still trying to amass property, grow our wealth and close that racial wealth gap.”
Until there is equitable access to credit across all races, Christensen believes blacks in America are “never going to catch up to our white counterparts.”
Is HUD on the right track? “Not even close.”
As CBC’s head of government affairs, Christensen has a front-row seat from which to watch housing policy develop in D.C. While she says a number of senators have their own pet initiatives for increasing homeownership and access to credit for U.S. minorities, she says that, overall, eliminating the housing gap isn’t enough of a priority.
Much of the blame can be laid at the feet of Ben Carson and the Department of Housing and Urban Development. In addition to devoting what she feels is too little time to visiting communities of color and witnessing firsthand the myriad issues in need of remedy, Christensen says HUD has also targeted CBC’s Chenoa Fund initiative, a down payment assistance program that has helped create thousands of new minority homeowners, by putting increasingly stringent limits on the kinds of assistance the program can provide.
HUD remains supportive of down payment assistance so long as it comes in the form of a gift from a family member, but funds coming from DPA programs like the Chenoa Fund are considered, without evidence, to be at higher risk of default.
“They’re looking at this as some kind of risk to the mutual mortgage insurance fund, where there is absolutely no data to back up their claims,” she says. “We’ve had Moody’s Analytics pull from our portfolio to analyze our loans, and they’re performing better than any of the state FHAs.”
HUD’s behavior is a prime example of the kind of unfounded bias (is that not the definition of a stereotype?) that ensures, wittingly or not, that the homeownership gap survives.
“To say that a person getting [DPA] from a government entity because they don’t come from generational wealth is somehow different from a white kid from the ‘burbs saying, ‘Hey mom, I need ten grand to go buy a house,’ – there’s no data to substantiate that claim,” Christensen says, adding that HUD is “not even close” to providing the level of assistance needed.
Another front-of-mind issue Christensen believes is deserving of a policy solution involves racism in the home appraisal space, where black neighborhoods are typically, and woefully, undervalued.
“You are at Four Corners. You can make a left onto Martin Luther King Boulevard, and a right onto Main Street,” she says. “Somehow the same house with the same square footage, the same brick, the same studs, is worth less on the black side of town than it is on the white side of town.”
Christensen’s colleague at CBC, company president Richard Ferguson, feels Washington must recognize that minorities’ credit profiles don’t often tell the whole story of their worthiness as borrowers. First generation Americans, for example, aren’t heavy credit users, and the credit sources they rely on – credit cards, finance companies – can be hell on a FICO score.
He feels that for a federal loan program to truly make a difference among people of color, it will need to include relaxed credit standards that reflect how minorities actually leverage credit. Relaxing those standards will lead to an incremental increase defaults, but that’s a price Ferguson feels America should be willing to pay in the interest of closing the country’s racial wealth gap.
“When you look at what’s happening around the country, with the rage that’s taken place, is it worth taking a higher default rate among those communities if that’s what it takes in order to help them get on that dream of homeownership?” he asks. “The only way we can help them become homeowners is by loosening up credit criteria in such a way that allows them to accomplish that.”
Diversify the mortgage workforce
In being interviewed for this story, Ferguson acknowledged the irony of two white males discussing solutions for people of color in the mortgage space, a clear illustration of the opportunity gap that exists between whites and every other group of Americans. The issue, yet again, is the transformative power of generational wealth and who has access to it.
“[White Americans] enjoy certain advantages in this country by virtue of the education that we’ve been able to have, by virtue of the wealth that we have, and that’s largely the result of generations of opportunity we’ve enjoyed,” he says.
Christensen says creating opportunities for minorities in the real estate industry, from appraisers to loan officers to realtors to executives, can provide a double dose of medicine for America’s greatest sickness: In addition to providing great jobs in a multi-billion dollar industry that’s proven largely impervious to the COVID-19 quagmire, putting people of color into positions of responsibility is sure to encourage their neighbors and other community members to approach the homebuying process with confidence – or at all – a massive hurdle for families who have previously encountered racism from originators or servicers.
“It makes a huge difference in communities of color, specifically young communities of color, to see like people assisting them,” she says. “You’re going to feel more comfortable at a baseline level because you feel as though they understand your struggle.”