Bank of America is expanding a mortgage program for low- to moderate-income homebuyers in an effort to address racial wealth gaps.
The lender, working with the nonprofit Neighborhood Assistance Corp. of America, set a goal of providing $15 billion in mortgages through May 2027, according to an announcement Tuesday. Buyers get loans with no down payment, at below-market fixed-interest rates, and with closing costs paid by the bank. The program has provided more than 42,000 home loans since its inception in 1996, including 9,100 in the last two years, of which more than 85% are for people of color.
“Homeownership is one of the means to build wealth and it evens the playing field,” AJ Barkley, a neighborhood lending executive at Bank of America, said in an interview.
Despite federal reforms in the last several decades, gaps between Black and white homeownership haven’t improved. In the second quarter of 2019, Black homeownership hit the lowest rate since the 1970s, at 40.6%. Meanwhile, white homeownership climbed in the beginning of 2019 to 73.1%. The following year ended with slightly higher rates but a similar disparity.
Frances White, a math teacher for gifted students in Portsmouth, Virginia, was turned away by multiple lenders and affordable-housing programs, or put off by unfavorable terms. White, who is African American, was frustrated by her inability to get a loan despite having a Ph.D. and stable employment.
“I just cried, and said, ‘Why can’t this happen for me? I’ve got a good job, I’ve got a good education and I can’t buy a house,’ ” she said in an interview. White was finally able to purchase a home through the BofA-NACA program in 2019. “You have to hang in there, you can’t give up,” she said.
NACA provides more than 30% of the housing counseling in the U.S., including include homebuyer education classes and financial management. Its program with BofA aims to eliminate the four biggest barriers to affordable homeownership: significant savings, unaffordable terms, restrictive underwriting, and racism and bias, according to Bruce Marks, NACA's chief executive.
“It’s setting a standard for the banking industry, that this is what other institutions should be doing,” Marks said.
