JPMorgan Chase doubles subsidy for home buyers to boost black ownership

The first days of Guadalupe Mora’s search for a new home were exhausting.

A health technician at a Veterans Affairs Department hospital, Mora slowly saved more than $ 15,000 to move from her two-bedroom mobile home to a new place she chose with her realtor.

But the lender she contacted first started chasing her day and night, pressing on her with demands for even more money and other evidence that she would be able to repay a loan.

The single mother of a 12-year-old boy who “thinks he knows everything,” Mora said that creditor agents would harass her with messages, even when she made it clear that she could not return text messages while at work.

“It was, really, very stressful. It was horrible,” she told CNBC last week, during the lunch break. “I work 12-hour shifts. I can’t – especially when I’m working at the Covid unit – it’s impossible to be on the phone constantly.”

The lender “just didn’t understand that I knew I needed the house – and I wanted the house. But I needed to keep my job in order to be able to buy the house,” she added.

Then, when Mora finally applied for a mortgage through Chase Bank, the 45-year-old learned that she qualified for the $ 2,500 Homebuyer Grant, one of the bank’s programs designed to help customers finance the purchase of a home. House.

The concession is just one of several assistance options that American banks have implemented in recent years to promote home ownership among black and Latino communities that have historically faced greater obstacles when applying for a mortgage.

To further advance that goal, Chase Bank announced on Tuesday that it will double its Chase Homebuyer Grant.

Chase, JPMorgan Chase’s American commercial and consumer bank, said that qualified home buyers in predominantly black neighborhoods across the country can now receive a $ 5,000 donation when buying a house through the bank.

While this amount can represent a fraction of the price of a home, it can help cover a substantial portion of the applicant’s entry or closing costs, usually the biggest obstacles for new buyers.

Chase’s move to boost the Homebuyer Grant comes just over four months after the bank said it would pledge $ 30 billion to help tackle wealth inequality in the United States, especially in historically underserved black and Latin communities.

The bank has pledged to use the $ 30 billion to finance another 100,000 popular housing units and sign 40,000 new loans for the purchase of homes for black and Latino families.

Still, housing advocates say the bank’s programs are delayed after decades of contraction, the subprime mortgage crisis and risky high-interest loans for Americans with a short or tainted credit history.

Many banks announced their new mortgage assistance programs in the months after George Floyd’s death on May 25 at the hands of a police officer and weeks of Black Lives Matter protests across the country.

Black ownership levels are especially low and consistently behind those of other minority groups and white families.

In the first quarter of 2020, 44% of black families were homemakers, compared with 73.7% of non-Hispanic white families, according to data from the Census Bureau. In the fourth quarter, this difference increased slightly to 44.1% for black families and 74.5% for white families.

Black households saw property ownership rates drop to 40.6% in 2019, the lowest level for demographics since the 1994 Census data.

Although black house ownership has recovered somewhat since then, the impact of Covid-19 and the subsequent recession kept the pressure down on the black house ownership rate throughout 2020.

Cerita Battles, head of the Chase community and the affordable lending team, told CNBC that she believes lenders need to play a proactive role in working to reduce these disparities.

“Absolutely yes. We must be part of the solution,” said Battles on Thursday.

“I think of myself as someone who is black,” she continued. “There were times when I bought my first home – I couldn’t go to my parents and ask for dollars to support me with the down payment. And to begin with, I didn’t have much wealth because of the difference in jobs that I had, and how I had to move up. “

Battles said she and her veteran husband received a significant portion of the funds to buy their first home through a loan secured by the Department of Veterans Affairs. Banks usually offer more favorable loan terms to applicants who qualify for a VA loan, since the department guarantees a portion of the mortgage.

Similar initiatives are underway at Bank of America, which announced on February 3 that it will invest $ 15 billion in affordable housing programs over the next five years, tripling its previous commitment.

Steve Boland, president of BofA’s retail business, told CNBC at the time that the demand for his initial $ 5 billion pledge was so strong that candidates quickly ran out of funds.

“We see the need. We got a great response from our customers. So we thought it would be appropriate to try to triple that and get 60,000 homeowners by 2025,” he said.

While the industry has received praise for its attempts to prioritize residential property among minority communities, the programs come after years of criticism from advocacy groups that claim that big banks have for decades aggravated racial discrimination in the U.S. housing market.

The racial prejudice encoded in the US housing market dates back almost a century, when government officials openly engaged in a practice known as redlining.

Beginning in the 1930s, surveyors outlined and classified neighborhoods in hundreds of cities across the United States to determine which ones were safe enough to finance. Communities that included more people of color were more often considered credit risks and, by extension, denied a variety of financial services, including mortgages.

Although Congress banned redlining in the 1960s, recent housing surveys show that the uncomfortable relationship between the black community and the loan industry lasted until the 21st century.

In the early 2000s, black families were disproportionately targeted with risky subprime loans, leading to foreclosure on more than 240,000 homes belonging to blacks and an execution rate almost double that of whites.

In a 2016 complaint, the US Consumer Financial Protection Bureau alleged that BancorpSouth illegally denied black Memphis area applicants certain mortgage loans and charged more than a few of its black customers.

The complaint stated that the bank required its employees to review minority orders more quickly than others, and not to provide them with the opportunity to receive credit assistance that might have increased their chances of obtaining a loan.

A more recent study by the University of California at Berkeley found that black and Latino candidates continue to face higher borrowing costs.

The 2019 study, which looked at 7 million 30-year mortgages, found that Latin and black borrowers “pay 0.079% and 0.036% more percentage points in interest on home purchases and mortgage refinancing, respectively, because of discrimination. “.

Creditors say these differences reflect the fact that minorities generally have less money available and lower credit scores. Critics argue that the disparities represent historical and structural problems that banks should help solve.

Recognizing this turbulent history, Battles said that an important first step in correcting property statistics is to try to ensure that black and Latin communities are aware of the new financial services available to them.

“There are many different things, I would say, that creditors can do to support this effort,” said Battles. And that, she said, begins with building trust in each community.

“We need to make sure that we are hiring people who reflect the markets we seek to serve,” he added. “It is important for us to make sure that we have people out there who can cultivate relationships and gain the trust and consideration of these customers and communities.”

Marcia Hernandez, newly married in August, says her years of history as a Chase client were critical when she and her partner, Vivian, started looking for a new home in a quieter neighborhood in the Miami area.

“For years I had Chase and started with my loans,” she said. “I got a little more online and ended up signing up for a pre-qualification and got a call the same day.”

The 31-year-old says she worked with a real estate loan consultant at Chase to determine a reasonable budget and the resources available to her. Although Hernandez was not initially eligible for a grant, a bank representative said he recently told him that he had received the new $ 5,000 grant.

“I daydreamed,” she said when asked about the scholarship. “It kept me from worrying about the future. I was shocked. I couldn’t believe it.”

“It opened up space for other projects,” he added.

Hernandez, scheduled to close his home on Tuesday, said he is looking forward to painting the walls and adding plants to his new home.