“I Have a Dream” – The Dream of Home Ownership

“I Have a Dream” – The Dream of Home Ownership

It was in 1963 that American civil rights activist Martin Luther King Jr. gave his “I Have a Dream” speech during the March on Washington for Jobs and Freedom. In the speech, King called for civil and economic rights and an end to racism in the United States. His dream was for everyone to have access to jobs, equal pay, housing, and all the opportunities that America offers its citizens. Dr. King said, “This is no time for apathy or complacency. This is a time for vigorous and positive action.”

As we honor Martin Luther King Jr. during the month of January, it’s essential to keep that goal alive by continuing to address the inequalities that exist. And, that includes ongoing discriminatory practices still found in the mortgage industry. Previously, we also discussed ongoing bias in the appraisal process.

A recent study led by sociology Professor Lincoln Quillian found that racial disparities continue in the mortgage market despite progress against discrimination in the housing market. The study looked at loan denial and cost trends against black, Hispanic, and Asian borrower from the 1970s until the present. The overall conclusion from the study is that black and Hispanic borrowers tend to receive a higher-cost mortgage than white borrowers — a trend that has not changed in the past 30-years.

An NBC news article also noted that the ongoing discriminatory practices in the housing and mortgage industries have created a “vicious” cycle for Black Americans. Continuing to deny access to them and other marginalized groups must stop.

From Dream to Reality

The dream and reality of homeownership for all are still alive despite these findings. Not only should the mortgage industry continue its anti-discrimination efforts, but this is also the time to increase them.

It’s up to us in the mortgage industry to carry on King’s mission to help those in marginalized communities to receive equal treatment regardless of their race or ethnicity when they want to buy a home. In doing so, we can help them build wealth that then can shrink racial wealth gaps – another part of King’s dream.

Many strategies are underway to equalize the home buying process that will be beneficial in 2022 and beyond:

Online Lenders Can Change the Lending Algorithm

A new type of mortgage lending tied to technological changes may become a game changer for home buyers. Research suggests that those mortgage companies that provided online lending tools can help change the use of discriminatory algorithms.

Doing so can ensure that more people be approved for mortgages based on their ability to pay versus their background or demographics. This approach may also help provide lower interest rate mortgages to Black and Hispanic borrowers.

The lesson here is that innovation is one of the best solutions we have to transform the dream of homeownership into a reality for more households and individuals.

The Government Helps to Regulate Much-Needed Change

A number of initiatives are also in the works to begin creating more positive change. First, the Justice Department is stepping up efforts to stop a discriminatory practice known as redlining. This practice involves lenders who avoid providing services to individuals living in communities of color due to their race or national origin. Although the practice is prohibited under the Fair Housing Act and the Equal Credit Opportunity Act, it continues.

To strengthen this initiative, the Justice Department announced in October 2021 that it is increasing enforcement of the nation’s fair lending laws. Actions include using the U.S. Attorneys’ Offices to get more involved with local experts to address specific credit needs in these communities. They also plan to partner with financial regulatory agencies to get information on existing fair lending violations so that the Department of Justice can take legal action against those lenders.

Second, the Federal Housing Finance Agency recently issued a Policy Statement on Fair Lending. It describes the action they plan on taking in 2022 to monitor and gather information, oversee examinations of violations, and promote greater administrative enforcement tied to all the laws in place related to fair lending. This includes the Equal Credit Opportunity Act, the Fair Housing Act, and the Federal Housing Enterprises Financial Safety and Soundness Act. Part of this policy statement also directly addresses plans to promote more affordable housing options.

However, agencies have yet to agree that proposed initiatives are enough to improve access to homeownership. Instead, more accountability is being demanded. For example, the Federal Housing Finance Agency (FHFA) has registered a formal objection to Fannie Mae and Freddie Mac’s 2022-2024 Duty-to-Serve plans for meeting legislatively-mandated goals that support underserved communities with rural, manufactured, and affordable housing. Although the agencies can take action on the current goals, they are also being asked to simultaneously revise those goals.

We All Play a Role

It’s also important to know how you might protect yourself from lending discrimination. There are ways to empower yourself and get the mortgage you deserve:  

  • Know how mortgages work by taking a workshop or researching the topic online.
  • Understand your rights when it comes to what lenders can and cannot ask of you.
  • Be aware of what you need to ask to compare lenders.
  • Don’t allow yourself to be pressured into any loan.

In the coming months, we will be providing more information on these subjects to help educate you about the home buying and financing process. 

As a responsible lender who practices fair lending, American Mortgage Network (AmNet) is committed to ensuring homeownership for all. Our focus is on finding the right mortgage product that enables each customer to build wealth.

You have a dream, and we are here to make it a reality. Contact us now to learn more about our fair lending solutions for all first-time buyers, veterans, and everyone else!

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