Jonelle Marte, Washington Post, July 6, 2018

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In many way, African-Americans have regained the ground lost during the financial crisis. Many are finding jobs and getting raises.

But the holy grail of homeownership remains elusive. Forty-three percent of blacks owned homes in 2017, according to an annual report from the Joint Center for Housing Studies of Harvard University. In contrast, 72 percent of whites did, a gap that has mostly widened during the past three decades.

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The housing market is recovering nearly a decade after the financial crisis. But a recent increase in the national homeownership rate — the first in more than a decade — has done little to close the stark gap between black and white households. Blacks have also had smaller gains in homeownership since the recession compared with whites, Hispanics and Asians.

The gap persists even as African-Americans have experienced other major financial gains since the downturn. The unemployment rate for black workers dropped to 5.9 percent in May, hitting a record low. African-Americans’ wages have risen as much as the average since 2008. But when it comes to homeownership, one of the pillars of building wealth, black households are worse off than they were 30 years ago.

“We haven’t made any progress in homeownership since the passage of the Fair Housing Act in 1968,” said Nikitra Bailey, an executive vice president with the Center for Responsible Lending, a nonprofit group that researches abusive lending practices. “The little progress we did make has been wiped away by the foreclosure crisis.”

After finding steady jobs and rebuilding their credit after the recession, some African-Americans are having a hard time saving for a down payment. Black workers are more likely than other racial groups to see their paychecks, which are already smaller than those of the average white worker, eaten up by student loan payments and growing rental bills, housing experts say. And when they do feel ready to buy a home, people of color often face higher fees that make the loans unaffordable.

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Black and Latino borrowers were disproportionately hit by foreclosures in the financial crisis, studies show. About 8 percent of African-American and Latino homeowners lost their homes to foreclosure from 2007 to 2009, almost twice the rate of white homeowners, according to estimates from the Center for Responsible Lending.

African-Americans were more likely to experience foreclosure because they were disproportionately targeted for “toxic” mortgage loans during the boom years of the housing market, Bailey said. That included adjustable-rate loans, which exposed borrowers to higher interest rates and larger mortgage payments after the first few years, she said.

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After the downturn, banks and other lenders clamped down on credit, added more consumer protections and raised the qualifications for mortgages. Some consumer groups say the higher lending standards resulted in an overcorrection that made it especially difficult for people of color, who may have lower credit scores and modest down payments, to break into the market.

Many black borrowers find the loans they qualify for come with high fees that make them unaffordable, Bailey said. For example, some borrowers face loan level price adjustments, or additional fees based on credit scores or the size of a down payment.

Buyers providing down payments of less than 20 percent of the purchase price may also need to pay for private mortgage insurance, which increases their monthly costs. Together, the fees can add 3 percentage points to the interest charged over the life of the mortgage, making the loan too expensive for some would-be owners, Bailey said.

Homeownership is still one of the main avenues Americans have for building wealth. A long-standing wealth gap between black and white households — the median net worth of white families is nearly 10 times that of black families, according to the Federal Reserve — makes it especially difficult for people of color to build up the savings needed to buy a home.

In turn, the lower homeownership rate among blacks makes it more difficult to close that wealth gap.

“How can blacks and Latinos have high down payments with a history of discrimination making it difficult for them to acquire any wealth?” asked James Carr, the lead co-author of an annual report on the state of black housing that is published by the National Association of Real Estate Brokers. {snip}

African-Americans’ path to homeownership has been hindered by a long history of unfair housing policies that either banned black workers from owning property or restricted them to certain neighborhoods with lower property values, said Ralph McLaughlin, chief economist of Veritas Urbis Economics.

Access to mortgages has improved over the past few years as lenders and regulators have eased the requirements for down payments, debt levels and credit scores. The black homeownership rate increased 0.8 percentage points last year, according to the Harvard housing report.

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Those rising property values, combined with higher interest rates, increase the amount that borrowers need to save for a down payment, causing even more pain for those who had foreclosures, Blomquist said.

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