Homeownership plays a pivotal role in building intergenerational wealth but largely remains elusive in the African American community. To understand why, we must examine the obstacles that have prevented the growth of Black wealth.
Where We’ve Been
Michael Innis-Thompson, Head of Community Development and the Fair Lending Center of Excellence at TD Bank, said, “In college, when I studied American history and the New Deal, I learned about a positive series of programs to support a fallen economy. But I didn’t learn until later how one of these government-sponsored agencies — the Federal Homeowners Loan Corporation (HOLC) — was one of the most detrimental decisions to impact Black homeownership in American history.”
HOLC established uniform appraisal methods to help people keep their homes. It also created a legal system that considered race as a fundamental factor in deciding the value and desirability of a neighborhood, and redlining began. Neighborhoods with high minority populations were shaded red for high risk, so lenders avoided those areas. This discriminatory practice prevented many Black families from buying during the 1950s and 1960s boom, while those who received loans often had very high interest rates, equivalent to predatory lending.
The Fair Housing Act (FHA) of 1968 made redlining illegal, but the economic impact had already taken root.
Where We Are
The homeownership and wealth gaps are wider today than in 1960, when housing discrimination was still legal. Some data to consider:
- According to the U.S. Census Bureau, as of Q4 2023, the white homeownership rate was 73.8% while the Black homeownership rate was 45.9%.
- Median wealth for white families is $184,000 compared with $23,000 for Black families, reported the Federal Reserve Bank of St. Louis.
- Freddie Mac found that Black and Hispanic individuals are more likely to have a credit score of 660 and below than white and Asian individuals. That translates to higher costs for credit like car and home loans.
Where We Want to Be
TD has committed to increasing homeownership by further diversifying its mortgage salesforce in Philadelphia and other communities. The bank launched a Special Purpose Credit Program — TD Home Access Mortgage — designed to increase homeownership for Black and Hispanic individuals. The Equal Credit Opportunity Act and Regulation B permit lenders to extend credit to persons who may not otherwise qualify and can be based on factors like race.
TD Home Access Mortgage offers a $10,000 lender credit toward closing costs or a down payment for purchases that do not need to be repaid. Along with a greater debt-to-income (DTI) ratio and expanded underwriting requirements, it provides a pathway to make homeownership more affordable.
Other steps include:
- Expanding FICO score requirements, DTI and loan-to-value qualifications for TD Bank Right Step Mortgage
- Reducing home equity loan minimum from $25,000 to $10,000
- Launching TD Essential Banking, a low-cost, no overdraft fee deposit account
- Creating TD’s Fair Lending Center of Excellence to further reinforce and advance its commitment to fair and responsible banking.
Meaningful work is being done to increase opportunities for Black families to buy homes and build generational wealth. But it will take every one of us to make changes and repair the damage. The best way to accelerate Black homeownership is to provide more equity and to actively be a part of the change.