By john a powell and Dedrick Muhammad,
The American Dream of homeownership will be under siege if we take seriously recent government proposals to reform the housing finance market. Government regulators have already taken steps to increase down payments for loans made through Fannie Mae, Freddie Mac and the Federal Housing Authority, and are also considering mandatory (and arbitrary) down payment requirements. These moves and other recent government proposals could further racialize our housing and credit markets by effectively disqualifying many lower-income borrowers, including a large share of borrowers of color. Together, the impact of these requirements would erase many of the advances in homeownership achieved over the past 40 years.
Homeownership has long enjoyed broad bipartisan support, but different families and communities have experienced homeownership differently. The lingering subprime and foreclosure crisis has brought this truth into stark relief: otherwise-qualified borrowers were steered into subprime loans. At the peak of the subprime lending boom, only 9% of subprime loans went to first-time homebuyers. The majority of subprime loans were equity re-financing loans, many of which ultimately stripped equity (reversed homeownership) in communities of color.