Bank of America draws mixed reviews for zero-down mortgages aimed at boosting Black, Hispanic homeownership

Bank of America Corp. is drawing mixed reactions on social media to a zero-down-payment mortgage program that aims to bring first-time home ownership closer to more African-American and Hispanic families.

Reader comments about Bank of America’s new Affordable Loan Solution often compared the program to subprime loans, which collapsed as part of the overall real estate meltdown that in turn precipitated the 2008 financial crisis.

Others applauded the move as a way to address the decline in home ownership rates among black Americans between 2010 and 2020.

Banking giant BAC,
introduced the new loan product earlier this week. It is described as a special purpose credit program being tested in select markets including Charlotte, Dallas, Detroit, Los Angeles and Miami.

In addition to down payments, the program offers no closing costs for first-time home buyers with no mortgage insurance or a minimum credit score.

“Is this an adjustable rate mortgage? As black neighborhoods are already destroyed by predatory lending,” @mcdpeach said on Twitter in reaction to an NBCNews article about the bank’s mortgage program. “I trust BoA as far as I can throw it.”

@Armanwalker said black home ownership rates remain at our near historic lows and the housing gap has widened. “These are not predatory loans,” @Armanwalker said.

A Twitter user named @Benhem612 questioned whether Bank of America’s program would be coupled with protections to prevent homes from being sold for “pennies on the dollar.”

Twitter user @CamTsn compared the program to Ninja loans, which are loans provided with little or no effort to investigate repayment ability. “What a great idea, offering Ninja 2.0 loans at the top of a housing bubble,” @CamTsn said. “I am absolutely confident that this will not adversely affect minorities and their communities.”

In describing its new mortgage program, Bank of America said it weighs mortgage eligibility based on timely payment of rent, utility bills, phone and car insurance, with homebuyers required to obtain a certification rating from approved housing counselors , before the application.

The bank’s mortgage push comes as the Federal Reserve and other bank regulators work to update the Community Reinvestment Act (CRA) in an effort to increase the rate of homeownership in low-income areas. One of the objectives of the updated CRA is to promote special purpose credit programs aimed at stimulating lending.

While the overall U.S. homeownership rate rose 1.3 percent to 65.5 percent in 2020, the rate for Black Americans fell to 43.4 percent in 2020 from 44.2 percent in 2010, according to the National Association of Realtors . The homeownership rate among African Americans remains nearly 30 percentage points behind the 72.1% homeownership rate among white Americans.

Bank of America said the Community Affordable Loan Solution adds to its commitment to community homeownership to provide $15 billion in home loans by 2025, with the goal of helping 60,000 individuals and families buy homes.

The Charlotte, NC-based bank has also committed an additional $15 billion through May 2027 to the Neighborhood Assistance Corporation of America (NACA) to provide mortgage loans to low- and moderate-income homebuyers.

Read also: Mortgage rates rise to 5.66%, the highest level since June, likely to slow price appreciation.

Bank of America, which fell 1.7% in morning trading Thursday, has fallen 10.5% over the past three months, while the XLF SPDR Financial Select Sector,
the S&P 500 SPX has also lost 6.6%,
has fallen 4.7%.

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