Recent Research by the Urban Institute on What Can Close the Gap

› Black households face systemic barriers to homeownership, including limited wealth, inequitable access to credit, and housing affordability constraints. Black mortgage applicants are twice as likely to be declined for a mortgage as white borrowers. Analyzing mortgage denial rate disparities can highlight opportunities for greater fairness in mortgage underwriting. Returning to more reasonable underwriting guidelines could enable roughly 1 million more households, many of those Black households, to become homeowners a year.

› As part of a partnership with the FHLB of San Francisco to spur mortgage innovation and advance Black homeownership, researchers are exploring the potential of using alternatives to credit scores and the relationship between education debt and homeownership.

› CRA lending patterns show that income is not a proxy for race, suggesting the need for better targeting. Down payment assistance targeted to first-generation homeowners could help as many as 5 million households, 34% of them Black, become homeowners. Special Purpose Credit Programs can encourage lending to people and places that have long faced disparities.

› Fannie Mae’s and Freddie Mac’s new Equitable Housing Finance Plans offer hope that these mortgage giants will serve more Black borrowers, but data is required to hold them accountable.

› Improvements in availability of smaller mortgages, FHA purchase-rehab loans and rate buydowns would make it easier and more affordable for many Black renters to become owners. Streamlining refinances can help more Black homeowners benefit when rates fall.

› Automated valuation models (AVMs) may reduce appraisal bias, but measures are needed to ensure disparities are not wired into the models.

› The FHFA recently announced that Fannie Mae and Freddie Mac will offer payment deferrals for borrowers facing qualified hardships. Our research shows how normalizing successful COVID-19 forbearance policies could disproportionately benefit Black homeowners. Further enhancements to FHA’s foreclosure prevention options could help sustain more Black borrowers, who disproportionately hold FHA loans.