Blacks and Latinos represent a fast-growing segment of the U.S. population; yet, their number among conventional mortgage borrowers is declining. These dual trends could have ramifications for the property market, if minorities are not empowered to buy homes, and for the economy at large, if they cannot accumulate wealth through ownership.
While ignorance about the mortgage process and lower incomes or credit scores are factors, homeowner advocates also point a finger at a continued pattern of racial bias in lending. "Prime African Americans should be getting [conventional] Fannie and Freddie loans just like prime white borrowers," insists Mitria Wilson of the National Community Reinvestment Coalition. "Instead, prime African Americans are being served by FHA, and more credit-constrained minorities aren't being allowed to buy at all."
In response, her organization and others are pressing Fannie Mae and Freddie Mac to adjust their underwriting and pricing policies as well as create alternative loan products to draw minorities back into the housing market. Specifically, they want the mortgage financiers to pull back from FICO in favor of credit-scoring products that incorporate information from the utility providers, smaller lenders, and other institutions that minorities are more likely to use. Other recommendations entail the Federal Housing Finance Agency, which regulates Fannie and Freddie, requiring the two firms to purchase loans in disadvantaged neighborhoods and perhaps to offer programs that lower fees for borrowers who complete housing counseling.