Testing Our Ability to Knock Down Barriers
The 30-point difference in the homeownership rates of Black households and white households is virtually unchanged since 1968, when the Fair Housing Act was passed. The roots of this inequity are deep, fed by the long history of housing discrimination and disinvestment in communities of color that have led not only to housing disparities, but profound wealth disparities.
Earlier this year, Fannie Mae announced its plans to advance greater equity in America’s housing finance system through the Equitable Housing Finance Plan. A key focus of the Plan is knocking down barriers to quality affordable rental housing and homeownership for Black people and other underserved groups – in a way that makes good sense not only for a home buyer but also for the housing and mortgage systems that enable homeownership.
Which is to say: We want to test solutions that could help to improve access to mortgage finance and increase the rate of Black homeownership in a way that is safe and sustainable for borrowers and lenders alike.
This month, Fannie Mae will begin using a tool called a special purpose credit program to test those possible solutions. Allowable under federal law to meet the needs of underserved borrowers, special purpose credit programs, or SPCPs, are a vital part of our housing equity strategy and an important way for us to fulfill our Congressional mandate.
Fannie Mae will use this small-scale and targeted SPCP to test our ability to help borrowers who can afford a monthly mortgage payment, but can’t rely on traditional sources of generational wealth. This pilot program will permit participating lenders to leverage Fannie Mae's HomeReady® mortgage product to provide financial assistance to first-time homebuyers to help with down payments and closing costs, and combine these benefits with free homebuyer education and counseling.
The SPCP pilot initially will include a limited and diverse number of lenders serving first-time homebuyers who currently reside in majority Black census tracts in Atlanta, Baltimore, Chicago, Detroit, Memphis, and Philadelphia.
We want to test the hypothesis that down payment and closing cost assistance, combined with free homebuyer education, can effectively and sustainably be used to improve access to mortgage finance and homeownership. If it proves effective at promoting sustainable financing, and when combined with other innovations Fannie Mae has introduced to create a more inclusive mortgage eligibility assessment, this pilot could help to address the historically inequitable credit opportunities that have edged underserved populations out of homeownership and its generational wealth-building benefits.
As we launch this initial SPCP, it’s important to remember that addressing the racial homeownership gap is part of a long-term, comprehensive effort that will require strong partnerships throughout our industry. Fannie Mae is committed to this long-term effort, and to finding new ways to make homeownership more affordable, more fair, and more achievable for all people.