Homeownership has long been seen as the path to lasting financial stability, particularly for low and middle-income families. We’ve seen time and again that it leads to stronger communities and schools, and greater long-term stability and wealth for families. The nation had a major setback in 2007 and homeowners of all stripes felt the impact. While we’ve seen significant recovery overall since 2008, white families have bounced back at a more rapid rate while many black and Latino homeowners have barely recovered and still live in fear of foreclosure.
According to the American Civil Liberties Union, median white household wealth stopped falling in 2009 while the typical black household lost an additional 13 percent of its wealth between 2009 and 2011. Why? Because people of color who lost the most during the housing bust continue to be targets of questionable lending practices, are denied the relief they need from lenders and now suffer greater scrutiny when applying for home loans. The gap in homeownership rates between households of color and whites has widened, 46 percent compared to 72 percent, respectively.
Every wealth expert agrees that homeownership is fundamental to building wealth for middle and working class families. But how are people of color supposed to build wealth when they’re still reeling from the recession that has wiped out wealth for generations to come? And why are policymakers turning a blind eye to black and brown families being preyed upon once again by unscrupulous lenders? Housing-related legislation proposed so far, this Congress, has focused on denying the necessary financial education to families. These barriers have included everything from the “Pay Back the Taxpayers Act of 2015,” aimed at blocking contributions from the Federal Housing Finance Agency to the Housing Trust Fund, to recent attempts of using the funds as a pay-for for the highway bill. Yet Congress refuses to prioritize actually protecting homeownership or expanding access to credit for low-income and moderate-income families seeking the American dream.
Contrary to the pronouncements that “America is thriving” again and “the U.S. economy is doing better than expected,” communities of color know better. Large majorities of Latinos and African Americans believe they’re being left out of the recovery. If Washington is serious about income inequality, access to affordable housing should be a serious part of the solution.
Let’s remember: During the economic crisis, Democrats and Republicans worked across party lines and bailed out the very banks and insurance companies whose practices endangered the entire global economy. Yet on housing, we stand in policy purgatory, with no one willing to make the first move. While it’s been easy to blame Fannie Mae and Freddie Mac for the crisis, the truth is that the entire financial regulatory system broke down. The market was plagued with unrealistic expectations that housing prices would rise indefinitely and there was nothing in place to prevent or break the fall. The reality is that the housing bubble was one that the entire country had a hand in—Washington, Wall Street and Main Street.
Since the crisis, and under conservatorship, Fannie and Freddie have been stabilized and remain the best, and possibly only, option for many working-class families, particularly borrowers of color, to get home loans free from predatory clauses. These institutions may not be perfect, but we can’t let perfect be the enemy of the good when families across the country have few alternatives. Ending the conservatorship is a start in the right direction, allowing Fannie and Freddie to rebuild capital and expand access to credit to more low- and moderate-income families, which, in my view, will ensure working-class families have access to owning a home and securing a future for their families.
Fannie and Freddie, by charter, have a legal obligation to serve underserved communities, and the longer they remain vulnerable to dissolution, without a viable alternative, the harder it will be for deserving Americans to secure their chance at the American Dream. Yes, we will have to work hard to ensure that past mistakes are not repeated, but this administration has the authority today, and the moral obligation, to take action while there’s a chance to save homes and provide families a pathway to homeownership. Before the disparities among Americans grow even starker. The time to act is now.