By Rachel Puryear, Realtor with Berkshire Hathaway, (DRE 02099554), Legal Consultant, and Mortgage Loan Originator (NMLS 2019354)
Earlier this year, the U.S. Department of Housing and Urban Development (HUD) announced that the FHA would back mortgages for recipients of the Deferred Action for Childhood Arrivals (DACA) program. FHA loans are popular for first-time homebuyers, as they allow for low down payments and other benefits favorable to first-time buyers. The DACA program allows qualified individuals who were brought to the United States undocumented as children, to avoid deportation. This new development means, therefore, that people benefitting from the DACA program can now access beneficial FHA home loans that they could not previously access; thereby making it easier for them to buy homes.
This is a big deal for civil rights. Here’s some context as to why:
Inequities in housing have been a huge vicious cycle for racial inequalities throughout history and the present, and have come in many forms. Racially restrictive covenants written into deeds banned sales of homes to people of color throughout a great many housing developments into the mid-20th century. This ensured all-white housing developments. Redlining practices ubiquitous to the mortgage lending industry effectively blocked access for people of color to many neighborhoods. These are a couple of examples. Although these practices have now been unlawful for decades, their effects still live on in much more subtle forms; such as the prevalence of widespread single-family-only and other restrictive zoning laws and strategic limitations on development (aka NIMBYism). Furthermore, people of color who apply are denied home loans at higher rates than white applicants, still today, and also tend offered inferior products compared with whites. This is true even when accounting for credit scores and other eligibility factors.
One of the greatest forms of building wealth tends to be in homeownership. Many millionaires in this country achieved this major financial milestone through investing in real estate, thanks to the strong tendency for homes to appreciate in value over time. Therefore, making homeownership more accessible to more people, increases opportunities to build wealth and financial security. Expanded opportunity has the power to lift and keep families and communities out of poverty and economic disadvantage.
The mortgage meltdown and foreclosure crisis which occurred during 2008 heavily disproportionately affected African-American homeowners, and other homeowners of color. This has been a major factor in the widening of wealth gaps between African-Americans and white Americans in recent years.
Of course, HUD’s recent decision, as great as the news is; does not come close to resolving racial and housing inequalities. But anything which makes it easier for more people to buy and finance homes, especially people who have been underrepresented in homeownership; is a great step in the right direction. And, as always, policy matters.
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