Wells Fargo has announced a $60 billion lending commitment, to create at least 250,000 new African American homeowners, in an effort to address the lower homeownership rates in the black community. The banking and financial services holding company seeks to lend $60 billion to qualified African American consumers for home purchases by 2027, as well as to increase the diversity of the Wells Fargo Home Lending sales team, with $15 million to support a variety of initiatives that promote financial education and counseling over the next ten years.
According to the U.S. Census Bureau, by the year 2024, 75% of the expected 14 million new households (renters and owners) in the U.S. will be diverse. African Americans are projected to represent 17%, or the third largest segment, of the new households.
Boosting Black Homeownership
“Wells Fargo’s $60 billion lending goal can contribute to economic growth by making responsible homeownership possible for more African Americans in communities across the country,” says Brad Blackwell, executive vice president and head of housing policy and homeownership growth strategies for Wells Fargo, in a press statement. “We are proud to be the first mortgage lender to make a public commitment to help increase African American homeownership. And, we are grateful for the support of key housing and civil rights organizations, who work alongside us to increase economic prosperity in our communities.”
Joining Wells Fargo in this effort in the National Association of Real Estate Brokers (NAREB). Composed of African American real estate professionals, the organization has set a homeownership goal, along with two of the nation’s most influential civil rights organizations, the NAACP and the National Urban League (NUL).
The NUL provides homebuyer education and counseling through its network of affiliate offices across the country. “Homeownership has become an indispensable part of being a full participant in American society,” says National Urban League President and CEO Marc H. Morial, in a released statement. “An erosion of homeownership rates among African Americans represents not only a devastating financial loss, but a barrier to full participation in the American dream.”
Removing Barriers to Wealth Building
NAREB gave kudos to Wells Fargo’s $60 billion loan commitment. “The bank is the first financial institution to acknowledge publicly black Americans’ wealth building potential, which could be greatly improved through homeownership,” says Ron Cooper, president of the National Association of Real Estate Brokers, in a statement.“NAREB welcomes their entry into the struggle to close the ever widening wealth gap for black Americans, and looks forward to having Wells Fargo as a partner in NAREB’s ‘Two Million New Black Homeowners in Five Years’ program.”
According to NAREB’s 2016 commissioned study, The State of Housing in Black America, housing finance industry barriers, such as credit-scoring models, the lack of affordable housing inventory, and economic constraints, like unemployment and under employment, contributes to low homeownership among African Americans. In addition, barriers to homeownership in black communities include the costs associated with accessing mortgage credit, limited funds for downpayments, and lender averseness to extending credit to consumers with lower credit scores and smaller downpayments. Additional research concludes that the lack of exposure to generations of long-term homeownership and the persistence of myths about homebuying may keep future homebuyers on the fence.
Home Financing Options
Despite these factors, Wells Fargo has learned, through a series of consumer surveys with Ipsos Public Affairs, that African Americans view homeownership positively. The 2016 survey reveals 86% of all Americans say homeownership is a “dream come true”; with 79% of the African Americans surveyed saying it’s essential for building families, and 51% considering buying a home in two years.
Wells Fargo offers a number of home financing options, including its Your First Mortgage, a homebuyer education incentive that offers a downpayment as low as 3% for fixed-rate loans. For veterans, a VA loan requires no downpayment. Moreover, Wells Fargo is the exclusive provider of the Union Plus mortgage program, which offers benefits for most union members and their families. The Neighborhood LIFT program offers down payment assistance to low- and moderate-income homebuyers.