Two vital elements of social and economic mobility are to increase the homeownership rate by enabling more non-homeowners to become first-time homebuyers and reduce the racial disparities in homeownership rates caused in large part by deliberate discriminatory policies and practices. The Government Sponsored Enterprises (GSEs) have the ability to improve both through their affordable housing goals and lending programs.

The National Fair Housing Alliance (NFHA) and Center for Responsible Lending (CRL) believe that the Federal Housing Finance Agency (FHFA) should expand the eligibility of the GSEs’ affordable lending programs to include first-time, first-generation homebuyers with moderate incomes.1 First-generation homebuyers, defined as non-homeowners whose parents do not currently own their home, are unlikely to receive financial assistance from their parents to cover the substantial out-of-pocket costs of purchasing a home and, as a consequence, many with moderate incomes still struggle to become homeowners.

Allowing these first-generation homebuyers to receive the substantial benefits of the GSEs’ affordable lending products would bolster the GSEs’ efforts to increase the homeownership rate and, because Black and Latino families make up the majority of the group, also help reduce the race-based gaps in homeownership rates. In fact, including first-generation homebuyers whose incomes do not exceed 120% of area median income (AMI) as eligible for the GSEs’ affordable lending programs would add 1.2 million households of prime home-buying age (25-54) to the group of potential participants, of which the majority (about 630,000 or 53%) are Black or Latino households. This would increase the pool of eligible borrowers by 14%.

While some of these loans would not count toward the GSEs’ low-income purchase goals, they may contribute toward their “minority” and low-income areas purchase goals. More importantly, they would further the GSEs’ fair housing and public interest obligations and improve their Equitable Housing Finance Plans.