From: FSC Majority Staff
The Subcommittee on Housing,
Prior to the passage of the Fair Housing Act in 1968, federal, state, and local governments actively and explicitly enforced policies that discriminated against racial minorities seeking homeownership opportunities, making it harder for them to purchase homes in certain neighborhoods or to obtain financing on fair terms.1 During parts of the 20th century, state and local governments promoted segregation in neighborhoods across the nation by actively enforcing racially restrictive covenants, which were legally enforceable provisions in property deeds that prohibited racial minorities from purchasing homes in white residential neighborhoods. In 1933, the Franklin D. Roosevelt administration created the
Racial segregation in housing was not merely a project of southerners in the former slaveholding Confederacy. It was a nationwide project of the federal government in the twentieth century, designed and implemented by its most liberal leaders. Our system of official segregation was not the result of a single law that consigned African Americans to designated neighborhoods. Rather scores of racially explicit laws, regulations, and government practices combined to create a nationwide system of urban ghettos, surrounded by white suburbs.
After the passage of the Fair Housing Act, discrimination in the homeownership market was no longer as overt but continued to exist in different forms that have had incredibly harmful impacts on minority borrowers and communities. This is perhaps most clearly demonstrated by several studies and lawsuits that have documented the practice of reverse redlining in the lead up to the 2008 financial crisis.2 Specifically, minority borrowers were targeted for predatory mortgage products or products with less-than-favorable terms, setting them up to be disproportionately affected when the housing market crashed. For example, the
These trends set the stage for a crisis of starkly different proportions for minority homeowners compared to white homeowners. By 2011, during the height of the foreclosure crisis, about a quarter of
Current Trends and Future Projections
Today, a persistent gap in homeownership rates remains between minority and white households. According to the most recent
As homeownership continues to be a primary means for American families to gain wealth, the lagging rates of minority homeownership has significant implications for the racial wealth gap. The most recent
Ongoing Systemic Barriers
Systemic barriers to increasing minority homeownership continue to exist, such as the continued existence of predatory products that are targeted at racial minorities, policies that unnecessarily keep immigrants out of homeownership, and FHA policies that unfairly burden minority borrowers with additional costs.
Historically, rent-to-own contracts (also known as land contracts or lease-to-own transactions) have a long history of having predatory terms and being marketed to racial minorities as an alternative path to homeownership in the absence of affordable and available mortgage credit or down payment assistance.15 In general, a rent-to-own contract includes a standard lease agreement for a specified period of time, during which the title to the house remains with the landlord, and after which the tenant has an option to purchase the property. Despite the fact that a rent-to-own contract term begins with a standard lease agreement, state landlord-tenant laws generally do not apply during this period, allowing sellers to convey dilapidated properties to tenants and shift the obligation for maintenance, taxes, and substantial structural repairs to the tenant.16 Other common problems with these contracts include inflated purchase prices, issues with conveying title due to failure to disclose liens and mortgages, and evictions when the costs of maintenance and rent become too onerous.17 According to the
Access to Homeownership for DACA Recipients
Under current law, private mortgage insurers are required to cancel premiums once the outstanding principal balance reaches 78 percent of the original home value. In contrast, the FHA requires its borrowers to pay mortgage insurance premiums for the life of the loan. This means that FHA borrowers can pay far more in premiums over time than non-FHA borrowers. Moreover, the FHA disproportionately serves minority borrowers, meaning that the FHA's policy of charging premiums for the life of the loan is disproportionately harming these same households. The FHA has required borrowers to pay the annual premiums for the life of the loan since
* H.R. 2162. This bill introduced by Reps. Beatty and Stivers would provide a discount on FHA mortgage insurance premiums for first-time homebuyers if they complete a HUD-approved housing counseling program.
* HOUSFIN_001. This discussion draft from
* TLAIB_013. This discussion draft from
* HOUSFIN_002. This discussion draft from
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1 See e.g.
2 See e.g.
7 Zillow, "A House Divided: How Race Colors the Path to Homeownership,"
10 See e.g.
14 See e.g.
15 See e.g.
19 See e.g. Alana Semuels, "A House You Can Buy, But Never Own," the
21 See e.g.
22 See e.g. MBA
23 HUD Mortgagee Letter 2013-04
24 HUD Mortgagee Letter 00-38