At the National Association of Real Estate Brokers’ 70th Annual Convention, Federal Housing and Finance Agency Director Mel Watt brought up issues facing African American Homeowners and what can be done to fill critical parts of the Real Estate Brokers’ mission—ensuring access to credit and ensuring sustainable homeownership for African Americans.
According to Watt, the reasons African American home ownership has declined start with historical factors. Disproportionate African American unemployment and under-employment, low and stagnant wages, non-existent and depleted savings, and lower wealth in general. In addition to this, bad business practices such as subprime lending and predatory lending that targeted minorities with mortgages that were designed to fail, upon many other things.
Secondly, the increase in people in general, but especially millennials, to want to be flexible and rent instead of buy has affected homeownership rates. Lastly, cultural and social change, such as the delay in marriage, has increased. Most couples after marriage buy houses, but with the delay, homeownership is being delayed, too.
Though Watt acknowledged that homeownership isn’t right for everyone, he explained that everyone should be advocating for African Americans to diversify their investments beyond just their homes, as homeownership has been a great way for families to build wealth thus far.
“Studies confirm that, even after accounting for the severe adverse impact of the housing crisis, homeownership continues to be a powerful tool for building wealth in our communities,” Watt said.
The FHFA along with Fannie Mae and Freddie Mac who are in conservatorship, have taken steps to improve access to credit, which is one of the most challenging parts many African American’s face when obtaining a mortgage.
“Our analysis showed that many borrowers were creditworthy and could sustain paying a mortgage, but they did not have the money to cover a large down payment and closing costs. So we approved a limited program that allowed the Enterprises to purchase mortgages with only a three percent down payment.”
Watt hopes to further the understanding of some of the challenges African Americans face in the housing market and how the FHFA and GSEs are contributing to find a solution to the problems.
“More importantly, I hope my comments reaffirm our commitment to making progress as we seek to reach our common goals,” Watt said.
To see the full speech, click here.