Good afternoon and thank you to Lisa Rice of the National Fair Housing Alliance, Sarah Rosen Wartell of the Urban Institute, and Bob Broeksmit of the Mortgage Bankers Association for organizing today’s event and inviting the CFPB to participate in today’s virtual forum.
I’d like to begin by commending the NFHA, Urban Institute, and MBA for coming together to work collaboratively to address the legacy of housing discrimination and inequity. The homeownership gap has been stubbornly and shockingly persistent—basically unchanged in the more than 50 years since the Fair Housing Act was passed. The stubborn persistence of this gap shows that we need fresh ideas and approaches, such as the type of collaboration and partnership reflected in today’s event. I’m pleased that you all have come together to discuss the potential to use special purpose credit programs to promote fair and equitable access to credit and homeownership.
Homeownership plays such a critical role in the ability to accumulate wealth, and owning a home is an even greater component of wealth composition for African American families. In fact, home equity represents 57% of the net worth of Black households compared to just 41% of the net worth of white households. Closing the racial homeownership gap will thus play an important role in narrowing the racial wealth gap. A 2019 Federal Reserve Board survey found the average white household’s wealth is 8 times greater than that of a Black family and 5 times greater than that of a Hispanic family. And, one study of Survey of Income and Program Participation data collected in 2011 concluded that eliminating disparities in homeownership rates and equity appreciation would alone reduce the median racial wealth gap by nearly 50 percent. Thus, homeownership plays an important role in creating a more equitable future.
I want to share one story that illustrates the generational impact and negative financial effects of inequitable access to homeownership. Sarah Broom’s memoir, The Yellow House, tells of her Louisiana childhood home that, while central to the family’s shared sense of being, could not sustain the long-term equity needed to accumulate generational wealth. The home was a product of redlining, and it was built in an area prone to flooding, located far from the booming downtown of New Orleans, and set in a neighborhood deemed undesirable by the city, state, and federal governments. As we learn at the end, what equity did exist, along with the home, was washed away when Hurricane Katrina rolled through – a reality faced by many other families whose homes were located in predominantly Black neighborhoods of New Orleans. Ms. Broom’s story highlights the impact of structural racism—a house three generations old that leaves those generations with less than when they started.
Unfortunately, these historical and systemic issues are still with us, and their lasting remnants and consequences have been on full display during the COVID-19 pandemic. The CFPB’s Office of Research issued a special report in May 2021 detailing the enormous toll of the pandemic on minority homeownership. Compared to white borrowers, Black borrowers were 2.5 times more likely to end up in forbearance and two times more likely to end up delinquent. Similarly, Hispanics were 2.3 times more likely to end up in forbearance and about 1.5 times more likely to end up delinquent. While amended mortgage servicing rules just went into effect—and we do expect those rules to delay and prevent avoidable foreclosures, we are concerned that Black and Hispanic homeowners will be disproportionately represented in the foreclosure data once pandemic housing protections end.
Against the backdrop of the pandemic, we’ve seen greater attention to ending violence against African-Americans and to broader efforts to promote fairness and equity. The murder of George Floyd and the ensuing calls for justice have caused all of us to reflect more on the pernicious impact of racism and the need for a renewed focus on solutions. Many corporations, including financial institutions, have pledged funds to tackle racial inequities. By tackling inequities in the housing market, we can put homeownership in closer reach for more Americans—which can effectively help reduce the wealth disparity.
Back in December, we published an interpretive rule styled as an Advisory Opinion that discussed ECOA, Regulation B, and Special Purpose Credit Programs, or SPCPs. The Equal Credit Opportunity Act and Regulation B prohibit discrimination on a prohibited basis in any aspect of a credit transaction. The SPCP provisions of the ECOA and Regulation B, however, provide targeted means by which creditors can meet special social needs and benefit economically disadvantaged groups.
The historical inequities in housing make it difficult for many underserved borrowers to compete for credit and mortgages, so SPCPs serve as an important tool for mortgage lenders to assist those would-be homeowners. The SPCP provision in ECOA is also a recognition that government alone cannot solve this problem. All of us—regulators, policymakers, nonprofits, advocates, and mortgage lenders —must work together. Our mortgage markets are some of the most competitive in the world. The result is an incentivized lending community of for-profit and not-for-profit institutions able to create programs meant to attract new customers and serve a social good, which in today’s economy, is paramount to staying competitive.
I encourage you to read our publications on SPCPs. While the Bureau does not determine whether individual programs qualify for SPCP status, we are happy to talk with institutions considering SPCPs.
Thank you again and I look forward to future conversations on this topic.