Will Bank of America’s New Mortgage Program Really Help Black Homebuyers?

About five years ago, I did an unconventional thing for somebody who’s spent the better part of two decades in journalism: I went and got a real estate license. Not that I was tired of writing, my first love, but I’d just moved back home to Pittsburgh after a job loss and the loss of my mother to cancer. The real estate market here, like in many other cities, was booming, which made slangin’ houses seem a lot more lucrative than prospects for a writing gig that’d keep the lights on.

I was right about that—real estate was so lucrative that I’ve kept it as a side hustle to this day. But it also meant I was doing business in an industry that put me on an intimate basis with how structural racism and the race-wealth gap self-perpetuate, and I thought about all this yesterday when Bank of America, the country’s largest retail bank but also a culprit over the years in abusive lending schemes, announced a new program that it says should help Black borrowers and other groups traditionally on the outside looking in where homeownership is concerned.

As a journalist, both at The Root and in stops at places like The Boston Globe, where I covered the banking industry during the early-aughts housing bubble, I’ve written numerous times about how housing plays a central role in the wealth gap. In short: Black folks were locked out of mortgages by banks and even the U.S. government through racist regimes like redlining and blockbusting, the technical terms for now-outlawed ways that both lenders and real estate agents kept us from buying houses, at least in the most desirable (read: whiter) neighborhoods. Since most Americans lock the majority of their wealth in the equity of their homes, then, Black folks fell even further behind throughout the last century as the white middle class established itself.

Since wealth in the form of home equity can be passed down from generation to generation, Black folks in generations X, Y and Z get a shorter end of the stick when it comes to being able to tap inherited equity for anything from tuition to other investments to homes of their own. (We’ll leave the cumulative impact of devaluing entire neighborhoods and the overwhelmingly white appraisal industry for another day.) That’s what the legacy of housing discrimination looks like on paper.

Here’s what it looks like up close, when you’re involved in dozens of real estate transactions: On average, my white clients buy their first homes at younger ages and in higher price ranges, giving them the benefit of a longer time in which to build home equity as well as the ability to buy into “good” neighborhoods, the ones with sought-after schools where houses hold value and appreciate better. They’re also more likely to buy in cash or to use a so-called conventional mortgage, one that requires a stronger credit profile and in some cases a larger down payment but can offer more attractive terms and which sellers generally favor over offers from buyers with FHA mortgages.

Most relevant to Bank of America’s announcement is that the biggest hurdle for many of my Black clients is the cash needed to get into a home. Even when a borrower has the credit score and income to qualify for a sizable mortgage, getting a deal done in most cases requires a minimum 3 percent of the sale price for a down payment plus closing costs, taxes and lender fees (these things typically can’t be rolled into a mortgage). That quickly adds up to thousands, if not tens of thousands, on even a modestly-priced home. With some mortgages, cash-strapped buyers can ask sellers to help by paying their closing costs, but with buyers outnumbering available homes for sale over the past few years, good luck making that fly.Bank of America’s program, being piloted in Charlotte, Dallas, Detroit, Los Angeles and Miami, is supposed to address that problem by allowing borrowers in certain neighborhoods (lending based on race is verboten, so neighborhood is used as a proxy) to take out mortgages that don’t require down payments or have closing costs. It also eliminates private mortgage insurance, which can add hundreds of dollars to monthly payments for buyers who don’t put at least 20 percent down.

It won’t solve all the problems wrought by the housing industry over the past century, or even wash Bank of America’s own sins clean, but if it works as advertised it could help thousands of people for whom a few thousand dollars is the difference between owning and renting. It definitely would have helped dozens of Black folks I’ve talked to over the past five years, who worked hard to afford a house but to no avail.