Closing the Gap: There Are Serious Efforts under Way to Dramatically Boost the Homeownership Rates for African Americans. One Observer Says the Industry Has Gotten "Religion" over the Challenge of Putting More Minorities in Homes, and It Is Showing Results

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OVER THE PAST THREE YEARS, MANY OF THE COUNTRY'S LARGE AND MIDSIZED LENDING institutions have rolled out programs to increase homeownership among the nation's minority populations. The commitment to bring mortgage dollars to potential minority homeowners now totals in the billions. Not only have government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac created new programs, but so have some of the biggest mortgage originators in the country. * Count among these companies Countrywide Financial Corporation, Calabasas, California; Washington Mutual Inc. (WaMu), Seattle; J.P. Morgan Chase & Co., New York; and CitiMortgage Inc., St. Louis. * Simply throwing dollars at the problem of improving minority homeownership, however, is not the solution. There are numerous financial and cultural hurdles that in the past have prevented minorities, in particular Hispanics and African Americans, from reaching the same homeownership rates as the majority of Americans. * While homeownership among Hispanics is still lower than among African Americans, there is a fear the latter group will not expand at the rate of the former. * Third-quarter 2003 data released by the U.S. Commerce Department data in October shows the percentage of American households that own their own homes expanded to 68.4 percent, the highest level ever. The same data also notes a very large gap between overall national figures and minority homeownership rates, with 46.1 of Hispanic households owning a home and 48 percent of African-American households owning a home. * The Association of Community Organizations for Reform Now (ACORN), Washington, D.C., parsed those numbers even more. An ACORN study released in October 2003 reports that African Americans comprise 13 percent of the population, but received just 5.1 percent of conventional purchase loans in 2002. This is a slight increase from 2001, but a decrease from 1997, when they received 5.5 percent of such loans.

In contrast, Hispanics comprise 12.5 percent of the population and received 8.5 percent of purchase loans in 2002, up 13.3 percent from 2001 and an increase of 60 percent from 1997.

Also, from 2001 to 2002 all home-purchase loans to Asians increased by 18 percent, to Hispanics by 11 percent, to Native Americans by 23 percent and to African Americans by 2 percent, reports Freddie Mac.

"African Americans as a group have undergone tremendous amounts of discrimination with regard to the home-purchase environment, so there is a historical belief in many quarters that the African American is not going to get a fair shake by players in the mortgage finance system," explains Scott Syphax, president and chief executive officer of Nehemiah Corporation of California, Sacramento, California, a privately funded charitable organization that provides down-payment assistance.

This level of cultural mistrust is "unique to the African-American population, "Syphax adds, and it is a remnant of what happened historically. Other cultural problems dog the process as well, including a lack of generational traditions of homeownership and the absence, in many cases, of financial literacy.

African Americans have the highest denial rate of groups of applicants for home-purchase loans--26 percent--says Michael Coffey, vice president of expanding markets for Freddie Mac. "That compares to 18 percent with Hispanics, 12 percent with whites and 10 percent with Asians," he says.

A special report entitled Insights into the Minority Homebuying Experience, produced by the Research Institute for Housing America (RIHA) and the Mortgage Bankers Association (MBA), Washington, D.C., reported five key hurdles in reaching out to minority communities in regard to mortgage lending. One of those issues was "finding trusted friends/advisers with knowledge of the business." An added highlight to that finding noted "although most participants were not able to cite specific personal situations in which they felt they were discriminated against in the mortgage application/approval process, most felt, with varying degrees of vigor, that homebuyers from the African-American community were discriminated against in the home-buying process. …