Brokers Group Promoting Homeownership Among African-Americans
Black Americans have the lowest homeownership rate of any ethnic group at 41.9 percent, according to a census report issued in January. That’s down from 49.1 percent in 2004, before the financial crisis. The homeownership rate for non-Hispanic whites is 74 percent.
“The main thing is that black homeownership does matter,’’ says Ron Cooper, a Los Angeles real estate broker, and president of the National Association of Real Estate Brokers (NAREB). You can’t tell by its name, but NAREB is a historically black organization founded 69 years ago to promote equal access to housing.
NAREB has launched a five-year campaign to increase the number of African-Americans who own homes nationwide by 2 million. “We lost quite a bit of equity wealth. We need to rebuild it,’’ Cooper told The Commercial Appeal, a Memphis-based publication. “The message is that the pursuit of homeownership of black Americans is still a noble pursuit. The American dream is within our reach; we just got to reach for it,” says Cooper.
NAREB is working “city-by-city and person-by-person” to encourage homeownership among black Americans, notes Cooper. The organization just concluded the second of four Mid-Winter Regional Conferences that include “Rebuilding Black Wealth Through Homeownership’’ events. The March 13-16 event was held in Memphis, where 63 percent of the population is African-American. The first event was held in Oakland, CA. The remaining conferences are planned April 7-9 in Philadelphia and April 21-23 in Chicago.
Why Memphis Matters
Each hub was deliberately chosen. Memphis, for example, was hard hit by the economic downturn. The foreclosure rate for black Memphians was seven times greater than whites, says Mark Alston, NAREB’s public affairs chairman. “Equity was stripped. And now you have an extreme level. You also have declining income and population since 2005 as well as a very high unemployment rate in the black community.”
In 2007, about 20 percent of single family homes in Memphis were rentals, says Tim Bolding, executive director of the nonprofit United Housing. Today, as much as 40 percent of houses in Memphis are rentals compared with 11 percent nationwide, he says.
Each NAREB event offers free education to prospective homeowners. “We want to make sure that black Americans have the correct information before entering the homebuying process,” explains Cooper. “We know the value of homeownership and how it significantly contributes to individual wealth building and community stabilization.”
The biggest barriers to homeownership in Memphis are the debt and credit problems of so many families. “We go through a lot of clients before we can get one that’s qualified to move on into homeownership,’’ Keith Turbett, First Tennessee Bank’s Community Reinvestment Act (CRA) officer, told The Commercial Appeal. “Unfortunately, we may go through 25 to get two that are ready to go.’’
First Tennessee partners with the nonprofit Operation Hope to provide free financial literacy workshops in Memphis. The bank also offers its Hope Inside program, basing two financial counselors at branches to offer free, one-on-one financial counseling whether the recipients are customers or not.
“African-Americans are denied (loans) almost twice as much as whites,’’ Turbett told The Commercial Appeal. “We’ve seen average (credit) scores of almost 53 points less for African-Americans than for whites. So we recognize we have a credit problem.’’
Generally, credit scores range from 300 to 850. “We feel the 700s is an average, good credit score to shoot for that usually gets you any loan,’’ Turbett said.
A recent First Tennessee quarterly report states that Hope Inside counselors saw more than 1,000 people, and 86 percent were African-Americans. “The average credit score was 581 when they first came in,” Turbett told The Commercial Appeal. “We’re trying to move them up to the 700s. One program is called 700 Credit Score Community.’’
Meanwhile, investors, including a lot of out-of-town landlords, continue to “pick and choose’’ houses that were once owned and occupied by black families, said Thomas Byrd, a broker with ERA Legacy Realty and president of NAREB’s Memphis chapter.
“A lot of our communities are just rental. That’s the big thing now. If we teach them to become homeowners and save and give them a plan and give them a road map to be a homeowner, it’s the key to wealth building,’’ Byrd told The Commercial Appeal.
For the average person, buying a home is the “first step to increasing wealth,’’ adds Regina Hubbard, a broker with Fast Track Realty in Memphis. “If you were not born into it, then homeownership is the first step to get there,’’ she told The Commercial Appeal. “Renting will help the landlord get there, but it won’t help you.’’
Patterns of Discrimination
In addition to homeowner education, the NAREB is addressing discrimination it sees with lending. Using the analytical LendingPatterns software of Compliance Technologies to probe the home mortgage data that lenders are required to report, the brokers association has found the following about Memphis:
- White applicants for home loans succeed in getting a mortgage at a rate 1.72 times more than black applicants. Compliance Technologies labels it the “origination disparity index.’’
- Black applicants are denied a loan at a rate 2.56 times greater than whites. The company calls it the “denial disparity index.’’
In 2014, lenders received 8,646 home-loan applications from whites in Memphis. Of those, 5,215 or 65.5 percent were successfully completed. But of the 7,000 loan applications received by black Memphians, 2,526 or 38 percent were approved by lenders, says The Commercial Appeal.
Source: “Black real estate broker drive home-ownership campaign,” by Thomas Bailey Jr. of The Commercial Appeal, published March 13, 2016.