Mortgage powerhouses Fannie Mae and Freddie Mac have recently announced some sweeping new initiatives aimed at addressing racial disparity in homeownership. It’s a serious and quantifiable issue; according to data from Fannie Mae, there’s a significant homeownership gap between White Americans, at 72%, and Black Americans, at 42%. And so these new moves – undertaken separately but with the same goal in mind – aim to help rectify that with respective three-year strategies. Here are some of the big takeaways from their plans.
- Financing assistance. Both Fannie Mae’s and Freddie Mac’s plans include Special Purpose Credit Programs (SPCPs) designed to give more Black homebuyers access to credit, with a focus on people who live in areas that were once redlined based on race and in similar underserved communities with majority Black residents. Freddie Mac’s plan also expands financing for developers of affordable housing in areas that were formally redlined.
- Lowering costs. According to federal law, a SPCP allows lenders to offer people who are members of groups that have been historically disadvantaged reduced pricing for things such as title and mortgage insurance costs. Fannie Mae also plans to initiate a SPCP pilot to lower closing costs for homebuyers through appraisal reimbursements in select geographic areas.
- A fresh approach to credit. Freddie Mac and Fannie Mae are each instituting new systems for credit reporting that consider rent payments, a factor that’s long been a barrier to loan approval for many potential homebuyers of color. Fannie Mae’s plan includes a pilot program to help Black renters improve their credit scores through financial education.
- Affordable housing. Freddie Mac says it intends to issue affordable housing bonds to the tune of $3 billion this year. Additionally, Freddie Mac’s plan looks to use public and private investments to preserve existing single-family and multifamily homes, seeking to renovate some of the aging housing inventory that commonly exists in areas with majority communities of color.
- Focus on multifamily housing. Freddie Mac’s plan includes outreach efforts to help boost the buying power of multifamily borrowers through increased access to capital and enhancing pooling practices for loans. Freddie Mac’s Develop the Developer program, which previously focused on single-family homes, will expand to include multifamily properties.