A YEAR IN REVIEW ADDRESSING THE RACIAL HOMEOWNERSHIP GAP NATIONAL ASSOCIATION OF REAL ESTATE BROKERS

The National Association of Real Estate Brokers, (NAREB), is a Real Estate Professional trade organization bringing together the nation’s minority professionals in the real estate industry. The organization was founded in 1947 in response to discriminatory housing practices and continues its commitment to fostering the expansion of inter-generational wealth creation of Black households leading under the principle, of “Equal Housing Opportunity for all.”

The State Of Housing In Black America 2022 Report

The State of Housing in Black America (SHIBA) report provides a comprehensive analysis of Black homeownership and the historic barriers Blacks face when seeking to purchase a home. The latest report finds that while Blacks are making progress in obtaining homeownership, the racial wealth and homeownership gap persist due to multifaceted barriers discussed throughout the report. NAREB offers six recommendations to address the effects of institutionalized housing discrimination and actions to close the homeownership gap.

Recommendations

› Eliminate Loan Level Price Adjustments

NAREB advocates for the elimination of risk-based or loan-level pricing (LLPA). LLPA disproportionately penalizes populations that were the principal victims of exploitative lending and implements discriminatory practices into the mortgage system. Charging financially weaker households higher costs as a result of the failure of the housing finance system to purge predatory loan products decreases the affordability of the mortgage and increases the risk of default.

› Eliminate Penalty Fees to Access Down Payment Assistance

NAREB recognizes down payment assistance as a critical form of homebuyer assistance. Increasing the down payment of borrowers helps improve mortgage accessibility and sustainability as this lowers a borrower’s debtto-income ratio, monthly mortgage interest, and principal payments, and improves loan affordability.

› Recalculate the Impact of Student Loan Debt

NAREB urges a reevaluation of the underwriting standards for student loan repayments and mortgage loan applications. Student loan repayments are factored in the debt-to-income (DTI) calculation of mortgage loan applications whether repayments are deferred. This penalizes borrowers for additional debts that are not-yet required payments affecting loan approvals and price basing snapshots of the borrower’s credit score and DTI. If a borrower cannot receive credit for future increases in income, borrowers should not be penalized for debts that are not due for repayment.

› Leverage Special Purpose Credit Programs

NAREB recognizes Special Purpose Credit Programs (SPCPs) as an alternative lending structure that may target economically disadvantaged populations on the basis of prohibited characteristics such as race, national origin, or sex without being in violation of equal opportunity or fair lending laws. SPCPs offer the benefit of alternative and productive lending channels to meet the mortgage credit needs of Black households who continue to be underserved by the U.S. housing finance system.

› End Discriminatory and Abusive Appraisal Practices

NAREB calls for discriminatory practices to end in the home appraisal industry. Black individuals and families continue to experience pervasive racial bias during the home appraisal process resulting in the devaluation of Black communities. Leveraging the recommendations made in the National Fair Housing Association’s January 2022 report, NAREB supports efforts to ensure civil and consumer rights advocates are included in the rulemaking process of the appraisal industry. Further, reducing the impact of appraisal bias should be ensured through fair housing training requirements and supporting individuals of color to enter the profession.

› Fix the Broken and Out-Of-Date Housing Finance System

The housing finance system developed in the 1930s was built on discriminatory practices and was ill-equipped to address housing needs across diverse racial economic communities. Continued practices of institutional racism and lending discrimination exacerbated racial homeownership inequalities and economic strain on marginalized communities. An updated housing finance system would ensure adequate capacity and innovation to create affordable homeownership programs and tackle outdated communities by reinvesting into low-to-moderate-income neighborhoods.