No Down Payment Mortgages Are Back. Can They Close the Homeownership Gap? Massachusetts MABA HomeOwnership RealEstate

 One of the nation’s largest banks is seeking to help rectify decades of housing discrimination against communities of color.  Bank of America announced this week that it will be offering zero down payment mortgages for first-time homebuyers in historically Black and Hispanic neighborhoods in five U.S. cities. Borrowers would be able to qualify for these loans by showing on time rent, utility, and other payments, and wouldn’t be on the hook for closing costs. While many real estate experts lauded the bank’s Community Affordable Loan Solution program as a way to help more people of color become homeowners, the program is not without risks.

 If the economy and housing market slip into the downturn that many fear, home values could fall, leaving the recipients of these loans owing more than their homes are worth which is what happened during the Great Recession. “Homeownership strengthens our communities and can help individuals and families to build wealth over time,” AJ Barkley, head of neighborhood and community lending for Bank of America, said in a statement. “Our Community Affordable Loan Solution will help make the dream of sustained homeownership attainable for more Black and Hispanic families.”

 After centuries of systemic racism in the U.S., the homeownership rates of people of color significantly lag white households. About three quarters of white households are homeowners, at about seventy four point six percent in the second quarter of this year, according to the most recent U.S. Census Bureau report. However, the homeownership rate is just forty five point three percent for Black households, forty eight point three percent for Hispanic households, and sixty one point one pecent for Asian households. The loan would cover the down payments and closing costs for approved first-time buyers in Black and Hispanic communities in Charlotte, NC; Dallas; Detroit; Los Angeles; and Miami. It may eventually be rolled out to other cities. In addition, borrowers would not be charged costly private mortgage insurance (PMI) which penalizes those who don’t put down at least twenty percent.

 Instead of looking at traditional credit scores, loan officers for the program will evaluate applicants based on their histories of paying rent, utility and phone bills, and car loans. The bank claims that applicants’ eligibility will be based on their incomes and the location of the home they hope to purchase. Applicants must go through a Bank of America-approved homebuyer certification course before applying to the program. “The racial and ethnic homeownership gap is as wide today as it was when discrimination was first made illegal,” says Janneke Ratcliffe, vice president of the Housing Finance Policy Center at the Urban Institute. Loans like this will help “more people have access to homeownership. We should see it make a difference.”

 That’s critical, as homeownership is the primary way that millions of Americans gain a toehold into the middle-class and build wealth that is passed down to future generations. Many minorities were denied this opportunity due to deed restrictions and redlining, which prohibited them from buying and receiving mortgages for homes in white communities, as well as steering and other government-sanctioned, racist housing policies. The bank is providing borrowers with grants between ten thousand dollars and fifteen thousand dollars so they have equity in their properties once they close, reported Bloomberg. However, if the economy succumbs to a recession and the home values fall, homeowners who received one of these no-down-payment loans could suddenly find themselves underwater on their mortgages.

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First Time Home Buying in Massachusetts

MABA Buyer Agents help first time home buyers reduce the stress and frustration normally associated with buying a home or condo – especially for first time home buyers.

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