By Marc Morial
Homeownership is part of the American dream and key to building wealth among all Americans. Over the past decade, increasing homeownership has helped more African Americans secure a larger sliver of the American pie paved the way for the building of larger nest eggs for the future.
Just a few years ago, black homeownership hit historic highs: nearly half or 49.1 percent of African Americans in 2004 owned their own homes. Since then, rising foreclosure rates have threatened that progress, with homeownership slipping down to 47.9 percent in 2006.
The slippage has set off alarms for us at the National Urban League that there is a homeownership state of emergency afoot. If something isn’t done soon, the problem will only get worse, especially for the least experienced consumers in the market.
To get our nation’s leaders to wake up and smell the impending disaster, we’re offering a Homebuyer’s Bill of Rights – to offer salient policy suggestions and to urge early intervention before the patient ends up in the emergency room or worse yet – the morgue.
The National Urban League Homebuyer’s Bill of Rights seeks to minimize four major obstacles that stand in the way of more Americans owning their own homes and keeping them: 1) lack of savings for down payments; 2) lack of information on how to show for homes and apply for loans as well as how to maintain ownership; 3) lack of quality affordable units in livable locations; and 4) lack of consumer protection.
Our policy suggestions are included under six separate rights we believe homebuyers should have in this nation:
1) The Right to Save for Homeownership Tax-Free
It can take up to three years or more for the average 35-year-old American to save enough to put a down payment down on purchasing a home. In a 2002 Fannie Mae Housing Survey, 35 percent of those polled cited high down payments as the main reason why they didn’t become homeowners. That is why we are recommending that Congress establish individual homeownership development accounts to encourage savings tax-free for future home purchases.
Similar to 529 educational saving plans and 401-K retirement plans, these matched savings plans would be administered by employers. Parents could set up accounts for their children at the time of birth so that by the time they become adults they’d have enough money for a down payment. It would give young adults, who have a hard enough paying rent let alone coming up with down payments, an incentive to set aside money. Our federal government, much like it did after World War II through FHA and VA loans, should play a role in helping more Americans come up with the money needed to set them on the course to homeownership.
2) The Right to High-Quality Homeownership Education
Some first-time homebuyers do not necessarily suffer from lack of resources to fund their first purchase. They suffer from a deflated sense of credit esteem because they’ve convinced themselves that they aren’t qualified to obtain low-interest mortgage loans when they are.
According to a Freddie Mac survey regarding consumer knowledge and confidence, only half of African Americans who had credit scores high enough to qualify for loans perceived themselves as qualified. It is obvious that we need to cut through the misconceptions surrounding the purchase of a home through greater education.
At the National Urban League, we have helped 20,000 Americans learn about what they need to do to purchase a home through our affiliates’ homeownership classes.
These efforts aim to ease the fear, trepidation and stigma faced by first-time homebuyers as they sort through the myriad of options available to them via various routes. What we’ve learned is that homeownership education works and that is doesn’t go far enough and doesn’t touch nearly enough Americans.