Hello, LOs!
This week, the Federal Housing Finance Agency came roaring back from the Labor Day holiday unveiling a new mandate to address equity in the housing finance system.
The FHFA didn't stop there. Just as the government sponsored enterprises subject to said mandate were reeling from the announcement, and the four-month deadline FHFA gave them to implement their plans, FHFA yesterday released numbers providing a clear picture of GSE performance when it comes to fair lending on the basis of race and ethnicity
At first glance, it's not great.
Both of the enterprises — which together own or guarantee nearly half of the nation's $11 trillion mortgage market — purchased proportionally less mortgages from Black and Latino borrowers in 2020 than they did in 2019. They also lagged behind the market when it came to Black borrowers.
The share of mortgages Fannie Mae and Freddie Mac acquired from Black borrowers in 2020 was 4.1% and 4.0%, respectively.
For context, in 2020, the share of home purchase loans amongst Black borrowers in the market overall was 7.3%, per Home Mortgage Disclosure Act data.
The Latino share of loan acquisitions also fell in 2020 for both of the GSEs, from 12.4% in 2019 to 11.5% in 2020 for Fannie Mae, and from 10.4% in 2019 to 9.9% in 2020 for Freddie Mac.
The share of loan acquisitions from American Indian/Alaska Native borrowers held steady at .7%, while for Pacific Islander borrowers, the share fell from a meager .5% in 2019 to .3% in 2020.
The message from FHFA to its regulated entities is clear, if a little ungraceful. FHFA wants the GSEs to do more to increase racial equity in the nation's housing finance system, post haste. And the numbers indicate that they have a long way to go, particularly for Black borrowers.
Nikitra Bailey, senior vice president of public policy at the National Fair Housing Alliance, told me that making sure GSEs are serving all of the market is not just a matter of doing the right thing. Reaching untapped parts of the market makes good business sense, particularly with demographic changes on the way for the mortgage industry.
"These borrowers are the future mortgage market," said Bailey. "If they can't access sustainable credit, existing homebuyers will not have borrowers to sell their homes to. And that could have a negative impact for older, white existing homebuyers."
It's clear that the Biden administration is making racial equity in the housing market one of its foremost priorities. It was just a month ago, for example, that a task force to address potential racial bias in how homes are valued was announced, with HUD Secretary Marcia Fudge and former United Nations Ambassador Susan Rice vowing to root out discrimination in appraisals.
And it's a priority Biden can pursue without Congress's approval.
Is this how the federal government should right the wrongs of the past?
Or are these announcements from FHFA getting tiresome? Send your thoughts to: gkromrei@housingwire.com
Georgia Kromrei
Senior Mortgage Reporter, HousingWire
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