Fannie and Freddie Unveil Plans to Tackle the Racial Homeownership Divide – Silicon Valley

By Anna Bahney, CNN Business

Mortgage giants Freddie Mac and Fannie Mae on Wednesday announced a series of actions aimed at making it easier to buy a home and closing the racial homeownership gap, in which 72% of white Americans are homeowners while that only 42% of black Americans own a home.

Sweeping changes include down payment assistance, reduced mortgage insurance premiums, and a credit reporting system that takes rent payment history into account. The companies are also expanding counseling services to support housing stability and plan to introduce technology that would improve access to credit and make home appraisals fairer.

The plans were developed in response to a request last fall from the Federal Housing Finance Agency, which regulates Fannie and Freddie, to address discrimination in homeownership.

The plans represent Fannie and Freddie’s commitment to “sustainable approaches that will meaningfully address racial and ethnic disparities in property and wealth that have persisted for generations,” said Sandra L. Thompson, acting director of the FHFA.

The need

For much of this country’s history, black people have been denied full access to housing and ownership, wrote Jeffery Hayward, executive vice president and chief administrative officer of Fannie Mae, in a blog post. He goes on to describe the practice of legalized redlining, which effectively prevented swathes of the black community in the post-World War II era from getting loans and buying homes.

“At Fannie Mae, we believe this racist legacy is one of the root causes of economic disparity in our country,” he wrote. “Ignoring this – pretending that our history does not affect the present and future of our country – is not only wrong, it is also economically destructive.”

Fannie and Freddie’s plans, he said, are aimed at better preparing potential buyers and renters, increasing diversity within the housing industry, breaking down barriers to homeownership and improve access to affordable rentals.

Fannie and Freddie do not issue loans, but rather buy loans from lenders to hold, sell or repackage them as investments. Their role in the mortgage market helps lenders make more loans and keep loans stable and affordable.

Two plans, similar goals

Fannie Mae’s plan offers several pilot programs to remove unnecessary barriers to first-time homeownership and access to affordable, quality rental housing.

Fannie’s actions will focus on three main areas: building credit and financial education, removing barriers that black people face when buying or renting a home, and retaining landlords and tenants in their homes.

“We want to break down these barriers, one at a time, by doing our part to undo the legacy of discriminatory practices that perpetuate racial housing gaps in America,” said David C. Benson, interim president and CEO. by Fannie Mae. “The plan is an important step towards that goal and an important milestone in our work to make housing stronger, fairer and more sustainable for the people and communities we serve.

Freddie Mac, meanwhile, said his plan aims to advance fair opportunities for buyers and renters in several areas, including encouraging financing for more affordable housing, helping renters through credit programs to tenants, providing market-based incentives to keep rents affordable, and improving access to capital for multi-family developers in Black and Latino communities.

Additionally, it aims to bridge the racial divide in homeownership by using a Special Purpose Credit Program, or SPCP, to purchase loans issued through lender programs that help expand homeownership. home ownership in underserved communities. Under federal law, lenders can offer special underwriting or pricing for traditionally disadvantaged groups under a SPCP, including reducing the cost of mortgage and title insurance.

“We plan to partner with lenders, investors and other stakeholders to make meaningful progress towards a fair housing finance system that provides access to wealth, opportunity and a sense of belonging to people and communities. communities across the United States,” said Michael Hutchins, president. by Freddie Mac.

Each company will maintain a published list of their pilot programs and their progress on their respective websites to help determine how well the initiatives are working.

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