Paying someone else’s mortgage: Many Black Americans struggle to own a home

This is the first in a series of blogs written by Community Solutions staff members of color in honor of the Martin Luther King, Jr. holiday and Black History Month.  

Married one year, my husband and I sat in front of a banker we had been referred to. We were trying to learn more about a first-time homebuyers loan backed by the Federal Housing Administration (FHA). We were newlyweds, a Black couple with two incomes, great credit - excited to purchase our first home. The bank’s lending officer studied both of us for a few seconds, and then asked, “What program are you talking about?” We were confused. We had taken a first-time homeowners class at Neighborhood Housing Services (which on July 1, 2019 became an affiliate of CHN Housing Partners) and we were referred to this bank. Yet the banker looked annoyed, and told us no such program existed. He then listed some steep loan requirements, beyond what we had learned about. This included a higher down payment before we could get a letter of preapproval, which many sellers expect before they’ll take a buyer’s offer seriously. We were at a loss.

 This happened in 2015, not that long ago, but well after the Great Recession.

We spoke to someone at the homebuyers class we had taken who verified that such a program did indeed exist. We stopped working with the first bank and found a mortgage lender who helped us obtain a loan for first-time homebuyers. This happened in 2015, not that long ago, but well after the Great Recession.  

Our experience is not unique. One advocacy group, the National Fair Housing Alliance (NFHA), found that discriminatory lending practices are still pervasive in major metropolitan areas. Mirroring what happened to us, in that study, African-Americans who posed as homebuyers were denied information about programs intended to help with home purchases and also had to face more requirements.1

Historical challenges and the illusion of equality

America’s history is ripe with landmark laws passed to promote equality -- so why does equality remain an illusion for so many Black Americans? The laws are there, but so is discrimination. History has shown that many programs designed to benefit all qualified Americans, were denied to Black Americans.

 Why does equality remain an illusion for so many Black Americans?

The G.I. Bill

During World War II, millions of Black servicemen and women returned home after the war, expecting to receive their fair share of benefits under the Servicemen’s Readjustment Act of 1941, also called the G.I. Bill. “The G.I. Bill provided financial support in the form of cash stipends for schooling, low-interest mortgages, job skills training, low-interest loans and unemployment benefits.”2 While millions of white Americans used the benefits from this bill to buy a home, attend college and build personal wealth, millions of Black veterans were denied these benefits. To quote President Bill Clinton, this was “the best deal ever made by Uncle Sam,” adding that it “helped to unleash a prosperity never before known.”3 For Black Americans however, this lack of access to a family home meant long-term loss of wealth.

Redlining

Mortgage lending should be a right afforded to any American, along with the right to live wherever one can afford. Ever heard of redlining? Redlining is defined as the “presumed practice of mortgage lenders of drawing red lines around portions of a map to indicate areas or neighborhoods in which they do not want to make loans.”4 Redlining was banned more than 50 years ago, but its impact still affects neighborhoods today. Many neighborhoods that were “redlined” still continue to struggle economically. In Cleveland and many other cities, people of color overwhelmingly live in these neighborhoods, locking them in “concentrated poverty.”5

 Redlining was banned more than 50 years ago, but its impact still affects neighborhoods today.

It’s ironic that someone who may have been denied a mortgage loan may be paying the landlord’s mortgage through rent. Yet, many Black Americans do just that. Facing redlining and discriminatory practices, many Black families have experienced a lack of wealth or a lack of opportunity to obtain wealth to pass on to the next generation. The wealth gap remains one of the prominent reasons why home ownership remains elusive. White families experience a median net worth of $171,000 which is 10 times more than Black families and eight times more than Latino families.6

The Civil Rights Act of 1964

The Civil Rights Act of 1964 was landmark legislation that aimed to end segregation in public places, and to ban employment discrimination on the basis of race, color, religion, sex or national origin.7 Civil rights leader Martin Luther King Jr. said that the Civil Rights Act of 1964 was nothing less than a “second emancipation.”8 However, it did not address fair housing.

 The wealth gap remains one of the prominent reasons why home ownership remains elusive.

The Fair Housing Act of 1968

The Fair Housing Act of 1968, intended as a follow up to the Civil Rights Act of 1964, made it illegal to discriminate in the sale, rental and financing of housing based on race, religion, national origin or sex.9 However, housing patterns based on race were still in force up to the late 1960s and Black Americans were met with hostility if they tried to challenge these norms. Despite the historic nature of the act, in practice, housing remained segregated. From the 1950s through the 1980s, millions of Black Americans increasingly lived in urban cities while their white counterparts moved out to the suburbs. Blacks felt further negative impacts as employment opportunities also moved into the suburbs with white people, and thus into areas where Blacks were not welcome to live. This resulted in cities overly populated with Blacks living in “ghettos,” facing limited employment opportunities and a higher rate of crime and other social ills.10

Current Roll-Back Protections

On March 14, 2018 the Senate passed a sweeping bill that would weaken the government’s ability to enforce fair-lending requirements. 11 This could make it easier for community banks to hide discrimination against minority mortgage applicants and harder for regulators to root out predatory lenders. This is a cause for concern as it may hurt the fragile gains of the Fair Housing Act.12

 White families experience a median net worth of $171,000 which is 10 times more than Black families and eight times more than Latino families.

The housing crisis resulted in many Black Americans losing their homes to foreclosure, and moving to rental homes. In 2004, Census data reported that half of all African-American families owned a home.13 In 2019, a report in Forbes highlighted a racial gap in home ownership. As of the second quarter of that year, white home ownership was reported at 73 percent, while Black ownership was at a record low of 40.6 percent.14  

According to a Redfin report published in July 2019, Black Americans have not benefited from the U.S. Housing Market as much as white Americans during the past economic expansion.15 The Redfin reports that Black Americans have fallen further behind white Americans as the race gap in homeownership rates widen. Overall wealth has fallen for Blacks and Latino Americans. Out of this group, Black Americans experienced the biggest decline in home ownership.16 The median net worth of Blacks dropped 2.8 percent in 2016, while it rose for whites into the double digits.17

Median Family Wealth by Race/Ethnicity, 1963-2016

Black History month and the federal Martin Luther King Jr. holiday are times to reflect on the progress that Black Americans have made, but reports show that Black Americans still lag behind in wealth.19 Federal data in wealth trends by race and ethnicity report that in 2016 white families had “the highest level of both median and mean family wealth.” Black families were reported as having 10 cents for every dollar held by white families. Research also showed that a white asset-based middle class did not simply emerge, but was helped by government policy that “provided whites the finance, education, land and infrastructure to accumulate and pass down wealth.”20 In contrast, Blacks were largely excluded from these same wealth generating benefits.21 Access to wealth and the security to pass it down to the next generation would go a long way.22

 Access to wealth and the security to pass it down to the next generation would go a long way.

I suppose if given a choice of paying a landlord’s mortgage through rent or owning one’s home, many would prefer the asset of home ownership. Before purchasing our home, my husband and I took advantage of the homebuying courses offered for free from the neighborhood housing service. We received valuable information on what to expect as homebuyers. The information included what to expect when financing a home, how to maintain your home and how to avoid foreclosure. What struck me most was not the amount of information offered, not the knowledge of the instructors, nor the fine examples given, what struck me most was the size of the class. It was so full of people -- many who were people of color – seeking the American dream of owning a home.

1. Washington Post, The ‘Heartbreaking’ Decrease in Black Homeownership, Feb. 28, 2019
2. https://progressive.org/dispatches/how-african-american-wwii-veterans-were-scorned-by-the-g-i-b/
3. https://progressive.org/dispatches/how-african-american-wwii-veterans-were-scorned-by-the-g-i-b/
4. Redlining https://www.thebalance.com/definition-of-redlining-1798618
5. https://www.washingtonpost.com/news/wonk/wp/2018/03/28/redlining-was-banned-50-years-ago-its-still-hurting-minorities-today/
6. Civil Rights Act of 1964 https://www.history.com/topics/black-history/civil-rights-act
7. https://www.washingtonpost.com/news/wonk/wp/2018/03/14/the-senate-rolls-back-rules-meant-to-root-out-discrimination-by-mortgage-lenders/
8. Civil Rights Act of 1964 https://www.history.com/topics/black-history/civil-rights-act
9. Fair Housing Act https://www.history.com/topics/black-history/fair-housing-act#section%5F1
10. Fair Housing Act https://www.history.com/topics/black-history/fair-housing-act#section%5F1
11. https://www.washingtonpost.com/news/wonk/wp/2018/03/14/the-senate-rolls-back-rules-meant-to-root-out-discrimination-by-mortgage-lenders/
12. https://www.washingtonpost.com/news/wonk/wp/2018/03/14/the-senate-rolls-back-rules-meant-to-root-out-discrimination-by-mortgage-lenders/
13. Washington Post, The ‘Heartbreaking’ Decrease in Black Homeownership, Feb. 28, 2019
14. https://www.forbes.com/sites/laurashin/2015/03/26/the-racial-wealth-gap-why-a-typical-white-household-has-16-times-the-wealth-of-a-black-one/#77e0b8fb1f45
15. https://www.redfin.com/blog/black-americans-homeownership-rate/
16. https://www.washingtonpost.com/news/wonk/wp/2017/10/05/heres-why-the-wealth-gap-is-widening-between-white-families-and-everyone-else/?arc404=true
17. Recent Trends in Wealth-Holding by Race and Ethnicity: Evidence from the Survey of Consumer Finances, the Federal Reserve, https://www.federalreserve.gov/econres/notes/feds-notes/recent-trends-in-wealth-holding-by-race-and-ethnicity-evidence-from-the-survey-of-consumer-finances-20170927.htm
18. https://www.washingtonpost.com/news/wonk/wp/2017/10/05/heres-why-the-wealth-gap-is-widening-between-white-families-and-everyone-else/?arc404=true
19. https://www.marketwatch.com/story/heres-why-black-families-have-struggled-for-decades-to-gain-wealth-2019-02-28
20. http://www.nareb.com/african-american-homeownership-falls-50-year-low/
21. https://www.federalreserve.gov/econres/notes/feds-notes/recent-trends-in-wealth-holding-by-race-and-ethnicity-evidence-from-the-survey-of-consumer-finances-20170927.htm
22. https://www.marketwatch.com/story/heres-why-black-families-have-struggled-for-decades-to-gain-wealth-2019-02-28