JPMorgan Chase doubles homebuyer scholarship to boost black home ownership

The early days of the search for a new home in Guadalupe Mora were exhausting.

Mora, a health care technician at a Department of Veterans Affairs hospital, was slowly saving more than $ 15,000 to move from her two-bedroom mobile home to a new spot she chose with her real estate agent.

But the lender she first contacted began to chase her night and day, urging her to demand even more money and other evidence that she could pay off a loan.

A single mother of a 12-year-old who “thinks he knows everything,” Mora said the lender’s agents would harass her with messages, even if she made it clear she couldn’t return text messages while on the job.

“It was, seriously, so stressful. It was awful,” she told CNBC during her lunch break last week. “I work 12 hour shifts. I can’t – especially when I work in the Covid unit – it’s impossible for me to be on my phone all the time.”

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

So when Mora finally applied for a mortgage through Chase Bank, the 45-year-old found she was eligible for the $ 2,500 Homebuyer Grant, one of the bank’s programs to help clients finance the purchase of a home.

The grant is just one of many support options that U.S. banks have deployed in recent years to promote home ownership among black and Latino communities who have faced higher hurdles in applying for a mortgage in the past.

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

Chase, JPMorgan Chase’s US consumer and commercial banking company, said qualified home buyers in predominantly black neighborhoods across the country can now receive a $ 5,000 grant when purchasing a home through the bank.

While that amount can represent a fraction of a home’s price, it can help cover a significant portion of an applicant’s down payment or closing costs, often the biggest hurdles for new home buyers.

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

The bank pledged to use the $ 30 billion to finance an additional 100,000 affordable housing units and issue 40,000 new mortgage loans for Black and Latino households.

Still, housing advocates say the banking programs are overdue after decades of redlining, the subprime mortgage crisis, and high-interest risk loans to Americans with short or compromised credit histories.

Many banks announced their new mortgage assistance programs in the months following George Floyd’s death on May 25 by a police officer and weeks of protests from Black Lives Matter around the country.

Black home ownership is particularly low and consistently lags that of other minority groups and white households.

In the first quarter of 2020, 44% of black families owned their homes, compared to 73.7% of non-Hispanic white families, according to data from the Census Bureau. In the fourth quarter, that difference had increased slightly to 44.1% for Black families and 74.5% for White families.

Black households saw home ownership fall to 40.6% in 2019, the lowest level for the demographics based on 1994 Census data.

While black home ownership has recovered somewhat since then, the impact of Covid-19 and the ensuing recession kept downward pressure on the black home ownership rate in 2020.

Cerita Battles, head of the Chase community and Affordable Loan Team, told CNBC she believes lenders should take a proactive role in reducing those inequalities.

‘Absolutely. We should be part of the solution, ”Battles said Thursday.

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

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

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

Steve Boland, president of BofA’s retail industry, told CNBC at the time that demand for the initial $ 5 billion pledge was so great that applicants quickly exhausted the allocation.

“We see the need. We had a great response from our customers. So we felt it was appropriate to try to triple that and get it done for 60,000 homeowners by 2025,” he said.

While the industry has received praise for its efforts to prioritize home ownership among minority communities, the programs come after years of criticism from advocacy groups who say that major banks have exacerbated racial discrimination in the US housing market for decades.

Codified racial bias in the U.S. housing market dates back nearly a century, when government officials openly engaged in a practice known as redlining.

Beginning around the 1930s, surveyors sketched neighborhoods in hundreds of American cities to determine which ones were safe enough to finance. Communities with more people of color were more likely to be considered credit risk and by extension denied a variety of financial services, including mortgages.

Although Congress banned redlining in the 1960s, recent housing research shows that the uneasy relationship between the black community and the credit industry was fraught well into the 21st century.

In the early 2000s, black households were disproportionately targeted by disproportionate subprime lending, leading to the foreclosure of more than 240,000 homes owned by black people and nearly double that of whites.

In a 2016 complaint, the US Consumer Financial Protection Bureau alleged that BancorpSouth Black applicants from Memphis-area Black had unlawfully refused certain mortgage loans and overcharged some of its Black customers.

The complaint stated that the bank required its employees to assess applications from minorities more quickly than others and not allow them to obtain credit that would improve their chances of obtaining a loan.

A more recent study from the University of California at Berkeley found that Black and Latino applicants still face higher funding costs.

The 2019 study, which examined 7 million 30-year mortgages, found that Latino and Black borrowers “pay 0.079% and 0.036 percentage points more interest on the purchase of a home and refinancing mortgages, respectively, due to discrimination. . “

Lenders argue that these differences reflect the fact that minorities generally have less cash on hand and lower credit scores. Critics argue that the inequalities represent historical and structural problems that banks should help solve.

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

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

“We need to make sure that we hire people who fit the markets we want to serve,” she added. “It’s important to us to make sure we have people who can nurture relationships and gain the trust and attention of these customers and these communities.”

Marcia Hernandez, just married in August, says her longstanding history as a Chase customer was key when she and her partner Vivian started looking for a new home in a quieter Miami neighborhood.

“I’ve had Chase for years and started my loans for the first time,” she said. “I educated myself a little bit more online and eventually prequalified and got a call within the same day.”

The 31-year-old says she worked with a home loan advisor at Chase to determine a reasonable budget and available resources. While Hernandez was initially ineligible for a grant, a bank representative said it had recently told her she’d gotten the new $ 5,000 grant.

“I was daydreaming,” she said when asked about the grant. ‘It made sure I didn’t have to worry in the future. I was shocked. I could not believe it.’

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

Hernandez, who was due to close her house on Tuesday, said she would love to repaint the walls and add plants to her new home.