Owning one’s own home has long been a smart way of building intergenerational wealth that most minorities have denied. During the pandemic, with low interest rates and government stimulus programs, the homeowner’s racial gap contracted, but since then it has expanded into the widest chasm in a decade according to the National Association of Realtors. In July, the Federal Reserve recommended even more constraints. Their proposed changes would force banks to keep more capital for residential mortgages mad with smaller down payments. To accomplish this, banks will demand higher mortgage rates for borrowers who can afford to pay only a minimum down.
They claim that such loans are less reliable, so banks should protect themselves by retaining greater reserves against defaults. Advocates say this is necessary to ensure the banking system remains sound. The NAACP, the National Urban League and the Urban Institute are all skeptical. The Urban Institute’s investigation into the scheme’s bearing on lowerincome minorities
determined it as “particularly perverse in the face of efforts by the bank regulators and other government agencies to encourage banks to increase their lending to precisely these borrowers and communities.”
Meanwhile, Black home loan applicants are usually more likely to be denied loans than others. What’s an aspirational homeowner to do? Working aged whites are more than twice as likely as Black and Latino households to get sizable financial help from parents or other elders; African Americans are more likely to be helping their parents and other family members. Restrictions like these may make alternative financing arrangements, such as rent-toown, seller-financed mortgages, and land contracts seem more attractive, but they are more dangerous, more expensive,
and offer scarcer consumer protections and oversight than traditional mortgages.
They more often result in default and the loss of the home, and all monies paid. Still, there are legitimate options for those who qualify. The City of Houston sponsors three programs under their Home Buyer Assistance Program. One is a no-interest, forgivable loan (https://recovery.houstontx.gov/dr17/hbap/) offering up to $30,000 to income-qualified Houstonians who are first-
time homebuyers, or who have not owned a home in the last three years. Another is for homebuyers who lived in Houston during Hurricane Harvey (August 25, 2017) and are either buying their first home or replacing a home lost due to Harvey. The third targets shoppers who want to buy near an A- or Branked school, who are willing to place the land underneath their home
into the Community Land Trust. The application approval process for these takes about six weeks.
