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Are Racial Disparities Hindering Housing Reform?


Access to mortgages in the housing market is a large part of the problem at hand in terms of reshaping the homeownership picture in the U.S.

African-Americans and other people of color lag behind whites in almost all economic indicators including higher unemployment, lower incomes, lower retirement savings, higher numbers of un- and underbanked, lower credit scores, lower homeownership, higher poverty, and less wealth than whites.

So what can be done to close the economic gaps between races and reform the housing finance system in America?

Marc Morial, President and CEO of the National Urban League and former the Mayor of New Orleans may have an answer.

Morial recently proposed the National Urban League’s Homebuyers’ Bill of Rights 2.0 in an essay published by the Urban Institute. The Homebuyers' Bill of Rights 2.0 is a guide to help all Americans, especially African-Americans and people of color, live the American Dream and gain wealth through homeownership.

"In the aftermath of the Great Recession, the tragic loss of wealth, and the bailout of the big banks, our national government must continue to play a central role in the housing market to right previous wrongs, ensure access to all qualified borrowers, and keep the housing finance system afloat for future generations," Morial wrote.

Marc Morial

Marc Morial

The National Urban League’s Homebuyers’ Bill of Rights 2.0 includes the following recommendations:

  1. Housing finance reform must include an explicit government guarantee and retain and strengthen affordable housing goals to ensure communities of color have access to affordable mortgages.
  2. Housing finance reform must include reform to the credit scoring model and down payment requirements to ensure all qualified borrowers have access to affordable mortgages.
  3. Housing finance reform must ensure housing counseling is part of the application process to educate borrowers and limit loan defaults.

Morial stated, "Today, we have an obligation to rebuild the American Dream through homeownership for an emerging generation of Americans, and our recommendations, as embodied in our Homebuyers’ Bill of Rights 2.0, present a path toward this crucial 21st-century objective."

In terms of economic disparities, African-Americans were affected more harshly by the Great Recession and financial crisis. According to Morial, homeownership is the primary means of building equity and passing on wealth from one generation to the next and this holds especially true for African-Americans. However, African-Americans only have 6 percent the wealth of whites, which Morial calls "unacceptable."

The African-American homeownership rate peaked in 2004 at 50 percent, but it now stands at only 42 percent and is expected to decrease to 40 percent by 2030, Morial reported. In addition, more than 25 percent of renters pay over half their income on rent-related costs, and Morial says it is safe to assume it is even worse for African-Americans.

"Unfortunately, owning or renting a home has become more expensive since the financial crisis, making it more difficult for African-Americans and other people of color to access affordable housing in decent neighborhoods. Most people of color—a disproportionate share of African-Americans, in particular—will continue to be renters unless meaningful policies address demographic shifts," Morial explained.

He continued, "People of color will continue to suffer the brunt of the current rental crisis, low homeownership rates, and the ills that accompany them without effective policy changes resulting from successful housing finance reform. It is essential for any effort to rebuild the housing finance system to be cognizant of this reality. To do otherwise is a formula for failure."

The Five Star Institute has a wide footprint in furthering the diversity and inclusion agenda in the mortgage industry with the newly announced 2016 Five Star Diversity Symposium and its member organization, the American Mortgage Diversity Council (AMDC).

The inaugural Five Star Diversity Symposium is a day-long event focused on advancing the conversation on diversity within the mortgage industry. The event will be held Thursday, June 16, 2016, at the The Belo Mansion, Dallas, Texas. Headline topics that will be covered at this event include: Thinking Outside the Box: The Future of Diversity in Mortgage Lending, The Bottom Line: The Business Case for Diversity & Inclusion, Incorporating Diversity and Inclusion Practices Into Your Compliance Management Program, Building the Best Team, and The Weakest Link: Issues in Supply Chain Diversity.

Click here to register for the 2016 Five Star Diversity Symposium.

Editor's note: The Five Star Institute is the parent company of MReport and TheMReport.com.

About Author: Staff Writer


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