Agencies unite to boost minority homeownership

The Bush administration wants 5.5 million more minority families to become homeowners by 2010, and the housing industry takes the goal seriously.

Representatives from lenders, builders, investors and government agencies convened recently at what was called the White House Conference on Increasing Minority Homeownership. The message: Increasing minority homeownership is good politics and good policy.

Almost 70 percent of white families own homes, and less than half of black and Hispanic families own homes.

Happy homeowners help America
"When people own their own homes, they not only build their own futures, they transform entire communities in ways that have enormous social and economic benefits to all Americans," Housing Secretary Mel Martinez says.

The Department of Housing and Urban Development predicts an economic stimulus of $256 billion if the goal is reached. To get there, HUD proposes an initiative called the Blueprint for the American Dream. The project calls for cooperation among governments, nonprofits and businesses. It has four components: educating potential home buyers; increasing the supply of affordable homes; helping people make down payments and pay closing costs; and making mortgages cheaper and more available.

The education component is rather amorphous and entails everything from holding homeownership counseling sessions in church basements to translating brochures into Spanish.

The administration's goal of increasing the supply of affordable homes is hard to define. The White House has pledged to address some of the peeves of the home construction industry, such as "anti-sprawl" laws in which suburbs limit new construction or require large lots. HUD also will hand out grants and tax credits for construction of affordable homes where there is a shortage of them.

Promoting down-payment help
The important action lies in HUD's final two goals of helping people make down payments and encouraging lenders to come up with more affordable mortgages. Nonprofits and businesses lead the way.

The Bush administration has asked for $200 million a year for the "American Dream Down Payment Fund." The idea is to provide about 40,000 low-income families a year with an average of $5,000 for down payments and closing costs. Congress has yet to fund the program.

Even if the federal down payment fund becomes reality in 2003 and continues until 2010, it will make barely a 5-percent dent in the 5.5 million-home goal. That's where a relatively new and growing industry comes in: nonprofit down payment providers.

These nonprofits serve as middlemen, allowing sellers to give buyers the money with which to make down payments. Most lenders don't allow sellers to fund the down payment directly, and the nonprofits let buyers and sellers bypass that ban. About 17,000 buyers use these programs each month, says Jonathan Cottin, head of the Homeownership Alliance of Nonprofit Downpayment Providers, a trade group that represents some of the biggest nonprofits in the industry. The group says many recipients are minorities.

There are quite a few loan programs out there that require a very low down payment or no down payment. Lots of potential homeowners don't realize that, says Craig Nickerson, vice president for community development lending for Freddie Mac. They still think you need to have a 10-percent down payment or 20-percent down payment to buy a house. "Another myth is that you have to have perfect credit to qualify," Nickerson says.

Freddie Mac has a 25-part initiative called Catch the Dream to encourage homeownership among minorities and immigrants. One of the goals is to spread the word that people can buy houses with 5-percent down payments or 3-percent down payments or even less, and that people with mediocre credit histories can get mortgages.

Most major mortgage lenders have programs targeting low-income and moderate-income buyers, many of whom are minorities and immigrants. One lender, Washington Mutual, has introduced a program called Community Access Home Loans, in which people can get loans without a credit score (which benefits those who don't have credit histories), without cash reserves, with a low down payment, and with high mortgage payments relative to income.

"It really allows borrowers who have proven they can manage a rent payment that's the same as the house payment," says Lori Vella, WaMu's senior vice president of retail lending.