Economy & Budget

Time to do the right thing

In 2014, only 5.2 percent of all mortgage loans were made to African-Americans, according to data collected under the Home Mortgage Disclosure Act (HMDA).  In the second quarter of 2015, the African-American homeownership rate registered at 43 percent, its lowest level in 20 years, which is down from about 50 percent in 2004.  For Hispanics in the second quarter the numbers are not much better, at 45.4 percent.  White families during the same period showed a homeownership percentage rate of 71.6.   

Enacting policies that increase homeownership opportunities for families presently locked out of the housing market must move to the top of the Administration’s agenda.  If we are to close the wealth gap in communities of color, we must solve the issue of decreasing homeownership among African-Americans and Latinos.  Asset accumulation, including owning a home, “is the foundation of economic mobility for low-and middle-income families,” according to the Center for Global Policy Solutions.

{mosads}There are a number of solutions which when combined can reverse the trend within our communities, including credit scoring models, regulatory changes impacting minority owned banks, and most importantly, preserving Fannie Mae and Freddie Mac.  Fannie Mae and Freddie Mac are essential to homeownership growth for African-Americans and Latinos.  Originally created to make mortgages affordable and to expand homeownership, these two pillars of affordable housing are under threat, and unable to provide the benefits they were designed to achieve.  

Now is the time to end the conservatorship of Fannie and Freddie and permit them to resume their function of homeownership affordability.  When the nation was hit with the housing crisis, Fannie and Freddie were hit hard as well.  To stabilize the housing government sponsored enterprises (GSE), the administration and Congress stepped in to cover the combined GSE debt of $187.5 billion.  Five years later, both Fannie and Freddie have fully repaid their commitments, and today most if not all the factors leading to conservatorship have been resolved.  However, Fannie and Freddie are still prohibited from fulfilling their function, and in fact are unable to hold profits, which are swept into the government’s general fund to reduce the national debt, and not for increasing affordable homeownership.  This scenario, creates the “worst of all worlds:  It attracts too little private capital, provides too little mortgage credit, and still poses too much risk to the taxpayer,” according to Jim Parott, former White House National Economic Council senior adviser under the Obama administration.  More importantly, the present scenario prevents homeownership and the creation of wealth within communities of color.

Elections are unpredictable, and we may soon lose any opportunity to preserve affordable housing and ensure the viability of Fannie Mae and Freddie Mac.  We urge the Department of the Treasury to act now to preserve the affordable housing GSEs, and place our communities back on track to sustainable homeownership. 

Grant is president of the National Bankers Association (NBA).  The NBA was founded in 1927, and is the recognized trade association for the nation’s 177 minority and women-owned banks (MWOBs).


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