7 Investments You Can Make to Help Fund Racial Justice

Racial inequality and injustices have been in the news a lot as of late, with protests turning into riots and the conversation becoming an impassioned subject of public debate. Uncomfortable as these conversations can be, the inequalities in our society are clear and apparent, leading many to wonder what they can do to make a difference.

But what can you do as an average investor — if you’re not a politician, a police officer, or a billionaire mogul? What power do you have to effect change and bring racial equality into the equation?

It turns out your investment strategy can be a major force in the push for change in racial equality across the United States and beyond.

How to Fund Racial Justice With Your Investments

One of the biggest ways you can effect change with your investment choices is to take part in a strategy known as impact investing — specifically impact investing designed to afford urban communities with the same opportunities afforded to white communities.

By maintaining an investment portfolio that’s focused on generating returns while funding social health through the support of racial equality, you’ll not only enjoy monetary gains, you’ll sleep well at night knowing you’ve lent a helping hand in the fight against racial injustice.

Here’s how:

1. Invest in Companies That Serve Urban Communities

As a result of systemic racism, Black communities aren’t afforded the same opportunities in many ways. Many of the publicly traded companies that serve minority communities are largely ignored by retail investors, institutional investors, and asset managers, but that doesn’t mean that they don’t represent strong opportunities for growth.

Companies that serve Black communities include:

  • Affordable Housing Stocks. A major source of racial inequality in the United States is found in the housing space. According to USA Facts, Black Americans are the least likely consumers to own a home; much of this is the result of a lack of opportunity, leading to low income. There are several publicly traded financial institutions and construction companies with a focus on the provision of affordable housing, and growth in these companies will help to shrink the divide between Black and white homeowners.
  • Black Media. The vast majority of talking heads you see on the news are white. The lack of Black representation in media means the needs of Black communities don’t become well-known — after all, you can’t solve a problem you don’t know about. By investing in Black media companies, you’ll give minorities a stronger voice, which will ultimately result in a better quality of life within these communities.
  • Urban Education. One of the biggest opportunities that Black communities miss out on is a quality education. According to the Postsecondary National Policy Institute, although college enrollment is up among African American students, they are not equally represented at different institution types. Black students only make up about 12% of the student population in public institutions and 13% of the student population at private nonprofit institutions, but 29% of the population at private for-profit institutions. Only 15% of college-educated Black students attended a highly selective college, with only 8% attending an elite research institution. Moreover, only 29% of African Americans aged 25 to 29 hold a bachelor’s degree or higher, compared to about 45% of white Americans in the same age group. Without a quality education, members of minority communities may struggle to gain the skills, certifications, and employment opportunities they need to earn significant income and become successful. By investing in urban education companies, you’ll help support the improvement of educational systems within these communities, helping to solve one of the biggest problems in the racial inequality conversation.

Pro tip: You can earn a free share of stock (up to $200 value) when you open a new trading account from Robinhood. With Robinhood, you can customize your portfolio with stocks and ETFs, plus you can invest in fractional shares.

2. Invest in Companies With Management and Board Members of Color

Publicly traded companies with Black owners, management teams, and board members will also help to cure the racial divide in the United States for multiple reasons:

  • Income Divide. The highest paying positions in Black-owned companies and those with diverse leadership boards are held by minorities. As a result, supporting companies that put minorities in high-income positions will help to alleviate the Black-white income divide across the United States.
  • Addressing Minority Needs. Large companies serve the masses, and large companies owned and managed by whites are likely to create products and services that cater to the white population. By investing in companies with owners and management teams of color, you’ll be supporting organizations that are more likely to address the needs of minorities with their products and services.
  • Creating Opportunity. By investing in companies with diverse managers and that value diversity, you’ll be supporting businesses that are more likely to provide good employment opportunities to minority applicants who may not have had access to these high-paying opportunities otherwise.

3. Invest in Companies That Support Charities and Causes That Benefit Urban Communities

Impact investing is centered around environmental, social, and corporate governance (ESG) concerns. Even companies that don’t expressly cater to Black communities or have many minorities in leadership positions have the ability to effect major social change by making equitable donations to nonprofit companies that serve Black communities.

Beyond donations to nonprofit charities serving urban communities, some of the largest companies in the United States are launching social awareness campaigns related to racial equity. Some of the most significant campaigns and contributors include:

  • Nike. Nike recently flipped its famous tagline, “Just Do It,” on its head, spending millions to run an ad based on the tagline,“For Once, Don’t Do It.” The ad urged consumers not to ignore the racial divide in the United States and not to turn their back on racial diversity. Instead, the ad urged consumers to make a change to cure racial inequity, promoting the idea that nobody wins until everybody wins with the hashtag #UntilWeAllWin.
  • Walmart. Walmart recently announced its commitment to set $100 million aside to be donated through the newly formed center on racial equity. These donations will be made to companies that are focused on solving the social justice issues across the country while providing a better quality of life within African American communities.

4. Invest in Funds That Support Racial Justice

There are plenty of investors out there who don’t like the idea of picking their own individual stocks. After all, there’s quite a bit of research and time commitment that goes into choosing investments this way. However, even if you don’t choose individual stocks based on their social merits, you can still choose to invest in diversified funds that support racial equality.

In 2018, the first exchange-traded fund (ETF) focused on racial empowerment was launched. The fund, known as the Impact Shares NAACP Minority Empowerment ETF, only invests in companies that are geared toward solving the racial divide across the United States.

Although there aren’t many ETFs that focus on racial justice at the moment, the Impact Shares NAACP Minority Empowerment ETF has seen compelling performance, nearly doubling in value from March of 2020 to February of 2021. There are many ESG-centered funds out there and hopefully their success will encourage more funds to follow the racial justice theme.

5. Look Into Crowdfunding Opportunities

Thanks to the incredible technological advancements that have been made over the past few decades, you don’t have to be an angel investor to own a piece of private equity. Moreover, making small investments in the right opportunities could make a much larger impact on racial justice than you think.

A quick search for “crowdfunding platforms” online will yield a long list of companies that give you the ability to invest in small startups with big ideas. As you browse through the available companies, you’ll learn about their goals, management teams, finances, and more.

There are plenty of new companies being born every day that are owned by, managed by, and cater to minority communities. As a crowdfunding investor, you can tap into the growth of these companies while supporting their advancements in racial justice with investments of as little as $10. You might even find Black-owned startups that cater to minorities right in your community that you can support directly.

Pro tip: Before you add any stocks to your portfolio, make sure you’re choosing the best possible companies. Stock screeners like Stock Rover can help you narrow down the choices to companies that meet your individual requirements. Learn more about our favorite stock screeners.

6. Consider Peer-to-Peer Lending

A well-diversified investment portfolio will include more than stocks and private equity asset allocation. Although peer-to-peer lending is a relatively new investment strategy, it is a model that’s gaining steam because it’s returning incredibly strong yields for those who take part.

As with crowdfunding, when investing as part of a peer-to-peer lending program, you’ll have the ability to learn about the borrowers for whom you decide to fund loans. Often, peer-to-peer lending platforms will even provide investors with pictures of the people who are asking for loans and what they plan to do with the funding.

By funding loans for minorities, you’ll be providing these borrowers with access to credit and capital they may not have had otherwise. With debt and the proper management of debt being an important part of financial growth for the average American consumer, funding personal or small-business loans for minority borrowers is a great way to lend a helping hand in the fight against racial injustice.

7. Work With Financial Professionals of Color

According to CarsonGroup.com, a staggering 86.3% of personal financial advisors are white. Even so, with more than 537,000 personal financial advisors out there, plenty of them are of minority heritage.

By working with a personal financial advisor of color, you’ll be doing two key things:

  1. Helping to Solve Income Inequality. One of the biggest disconnects between races is income. According to the Economic Policy Institute, wage gaps across the United States are growing, with the Black-white wage gap among average consumers reaching 26.5% in 2019. That means, on average, a white person is likely to earn 26.5% more than a Black person with the same job. Much of this comes from a lack of access to affordable, quality education among minorities. However, the story on income goes deeper. Many minorities who do achieve a higher level of education still find the task of landing a good job or getting potential customers to believe in their new business difficult. By hiring professionals of color to help with your investing ventures, you help to reduce the income gap between whites and minorities.
  2. Invest From a Minority’s Point of View. Investing with financial professionals of color means you can benefit from their perspective on your investment options, both in terms of returns and social impact you may want to achieve. Because they know the issues they faced growing up, through college, and in their careers, financial professionals of color will likely look to help people in their communities through their investments and the advice they give their customers.

Final Word

Investment decisions should never be made solely based on the fact that a company is Black owned, caters to minority communities, or for any other single reason. However, there are plenty of minority-owned-and-operated businesses that could benefit as greatly from your investment as your investment will benefit you in the long run.

As with any other investment, investments aimed at funding racial justice should be carefully thought out, well-researched moves. By looking into what the companies you invest in are doing and ensuring that their activities are helping to cure social inequalities rather than exacerbate them, you’ll sleep well at night knowing your investments are making a difference.

Source: moneycrashers.com

Berkeley considers ending single-family zoning by December 2022

Berkeley is considering ending single-family zoning by December 2022 in an effort to right the wrongs of the past and address the region’s housing crisis, city leaders say.

The City Council will vote on a symbolic resolution that calls for an end to single-family zoning in the city. But the controversial proposal has already upset some residents who’ve expressed concern that the change could ruin their neighborhoods.

Berkeley is the latest city looking at opening up these exclusive neighborhoods to more housing as the region struggles with exorbitant rents and home prices and increasing homelessness. Sacramento recently took a big step in allowing fourplexes in these neighborhoods and one San Francisco politician is pushing a similar plan.

Berkeley may also allow fourplexes in city neighborhoods. Next month, the council will consider that proposal, which will likely spark pushback from tenants groups fearful it could fuel displacement if more protections aren’t included.

For Berkeley, which has historically been anti-development, the moves are the latest shift as the city slowly embraces more density, including plans to add housing around the North Berkeley and Ashby stations.

Councilwoman Lori Droste, who is introducing the resolution, said she’s trying to undo the legacy of racism that created single-family neighborhoods, which cover 50% of the city.

In 1916, single-family zoning was born in Berkeley’s Elmwood neighborhood, forbidding the construction of anything other than one home on each lot. At the time, an ordinance stated that its intent was to protect “the home against the intrusion of the less desirable and floating renter class.”

“I live in the Elmwood area where it is sort of the birthplace of single-family zoning,” Droste said. “I thought it was incumbent upon me as representing this neighborhood to say that I want to change something that I think is detrimental to the community.”

Dean Metzger, the founder of the Berkeley Neighborhoods Council, a collective of nearly 40 neighborhoods, said he wants the opportunity to give more input before the city changes any zoning laws. He said he worries that if a developer builds a multistory building next to a single-family home, it could obstruct views, block solar panels and clog available parking.

Metzger said it’s hard to specify what kind of design would be most appropriate for Berkeley’s single-family neighborhoods. He said he wants developers to be required to seek input from neighbors before building.

“They’ve labeled us anti-growth; it’s really not true,” he said. “We are trying to find ways to accommodate the development and make our neighborhoods livable. (The council) just wants to build whatever they want to build.”

After a year of racial reckoning, the same criticism of law enforcement practices should be applied to housing policies, said Councilman Terry Taplin, one of the authors of the resolution.

“This is really a historical moment for us in Berkeley because now the racial justice reckoning really has come home,” Taplin said.

As the state grapples with a housing crisis, many housing advocates say city leaders have to undo decades’ worth of anti-density housing policies. They say Berkeley’s efforts are a necessary step in addressing the region’s crisis even if it takes time. If the resolution passes, it will take years before the city sees a change in its housing stock.

“It will take time,” said Grover Wehman-Brown, a spokesperson for East Bay Housing Organizations, which represents nonprofit builders. “It’s many, many decades and centuries in the making. Building housing takes time, especially in areas like ours where there are not just wide open lots that you can drive large equipment up to and start digging to build one house.”

David Garcia, the policy director at UC Berkeley’s Terner Center for Housing Innovation, said the proposal was a “big deal.”

“It wasn’t that long ago when Berkeley wasn’t considered the most forward-thinking on housing,” he said.

But he added that it’s crucial these policies don’t jeopardize existing housing. Outreach to residents is key, he said.

“It’s important to be thoughtful about these decisions because they cannot be easily reversed,” Garcia said. “Creating such a significant change of land use in such a large part of the city is going to involve a lot of planning and critical thinking on how to ensure the best policy outcome. You’re going to want to make sure the policy itself does result in the kind of housing city leadership wants to see.”

Eliminating single-family zoning is changing a status quo that has long favored wealthy, white property owners, and opposition can often stall change, said Jassmin Poyaoan, the director of the Community Economic Justice Clinic at East Bay Community Law Center.

She said local, state and federal officials have to focus on shifting a culture and mind-set around housing policies that focuses on “housing is a human right.” She emphasized that policy changes must focus on creating housing for very low-income residents, protecting rent-controlled units and fortifying tenant protections. This includes Berkeley’s future efforts to allow fourplexes.

But change is coming. Recently, the Berkeley council approved rezoning the Adeline Street corridor and even added an extra floor of height to what builders could do there. The plan allows 1,450 new housing units, about half for low-income families in an area that was once a thriving Black, working-class community, but has become increasingly white as the high cost of housing has driven out many families. Officials are now trying to undo that.

“I think it’s really easy to look at racism and injustice in other cities and other places, but it takes a lot more courage, introspection and vulnerability to look at the mistakes that we’ve made in these areas,” Taplin said. “We have to really take an honest look at our shortcomings and be open to changes that might make us uncomfortable.”

Sarah Ravani is a San Francisco Chronicle staff writer. Email: sravani@sfchronicle.com Twitter: SarRavani

Source: nationalmortgagenews.com

‘How Can We Catch Up?’ Mortgage Denials Stack the Deck Against Black and Hispanic Buyers

The American dream of homeownership is not an equal opportunity ambition.

Black and Hispanic home buyers are more frequently denied mortgages than white buyers—even when their financial pictures are similar, according to a realtor.com® analysis of 2019 mortgage data. When they are able to secure mortgages, Black and Hispanic borrowers are more likely to pay higher fees and interest rates on their loans than white and Asian borrowers.

“What we call it in my community is the ‘Black tax,'” says Donnell Williams. He is president of the National Association of Real Estate Brokers, an organization for Black real estate professionals, and a broker with Destiny Realty in Morristown, NJ.

“Even if we have a college degree, we’re still getting the same treatment as a white high-school dropout,” he says.

Black buyers were twice as likely to be refused mortgages than whites, according to the realtor.com analysis of 7.2 million loan applications in 2019. Only about 5.5% of whites had their loan applications rejected, compared with 6.8% of Asians, 9.3% of Hispanics, 11.7% of Blacks, and 10.8% of multi-minority race individuals hoping to be approved. These denials were only for applicants where all the data was available for fully completed applications that weren’t withdrawn.

Decades of discrimination against people of color have resulted in lower homeownership rates among minorities than among whites in America. And that has a deep, long-term impact on wide swaths of America, since homeownership is traditionally how generations have catapulted themselves into the middle class, as their properties appreciate in value over time.

Nearly three-quarters of whites, 74.5%, owned their homes in the last quarter of 2020, according to a quarterly report from the U.S. Census Bureau. However, just 44.1% of Blacks, 49.1% of Hispanics, and 59.5% of Asians were homeowners in the last three months of the year.

“There are a lot of obstacles that are working against buyers of color,” says Brett Theodos, a senior fellow at Urban Institute, a nonpartisan research group based in Washington, DC.

On top of racial discrimination, “they’re less likely to get help with the down payment from the bank of Mom and Dad,” says Theodos. “They’ve also [often] entered adulthood with higher student loan debt, less inheritance, and are on average in professions that earn lower wages.”

Many of these problems took root generations ago. Whites who served in World War II were offered low-cost mortgages for single-family homes in newly built suburbs when they returned. Blacks and other minorities were often denied access to these loans. In many cases, Blacks, in particular, were explicitly barred from living in white communities through a toxic combination of racial covenants written in deeds and government-supported redlining.

Black Americans, like these Tuskegee Airmen, served their country in World War II but returned home to face discrimination.
Black Americans, like these Tuskegee Airmen, served their country in World War II but returned home to face discrimination.

Bettmann/Getty Images

So Blacks who wanted to become homeowners often had to buy homes at inflated prices in less desirable areas. If they were able to get mortgages at all, they typically paid more for them. And homes in these areas haven’t appreciated nearly as much as homes in white areas, except in the places that have seen significant gentrification. As homeownership is used to catapult folks into the middle class and build wealth, that’s left many minorities with less money to pass down to future generations in the form of college tuition assistance or a down payment.

“How can we catch up? How can we be on par? We didn’t have that head start of generational wealth,” laments the National Association of Real Estate Brokers’ Williams. “You want a piece of the American dream, and it’s hard. You feel like your efforts are in vain.”

Realtor.com took a hard look at which races are most likely to be denied mortgages and the reasons provided for those rejections as well as who is paying the most for those loans. To do so, we analyzed 2019 mortgage application data available through the Home Mortgage Disclosure Act. The act, passed in 1975, requires most larger lenders to collect mortgage data and make it public. We looked at only first-lien mortgages on purchases of one- to four-family homes built on site, so manufactured homes wouldn’t be included.

When possible, we compared borrowers with similar financial profiles to see who was getting loans—and who wasn’t. However, our analysis doesn’t take into account certain discrepancies like credit scores.

Blacks most likely to be denied mortgages—even with good-sized down payments

According to our analysis, even aspiring home buyers of color with sizable down payments are more likely to be denied mortgages.

Black borrowers with 10% to 20% to put down were more than twice as likely to be denied than whites offering the same down payments. Lenders rejected 6% of whites and 9% of Asians—compared with 11% of Hispanics and multi-minority race borrowers and 13% of Blacks.

These higher denial rates may be due to minority borrowers having lower credit scores, more debt, or some other financial black mark. But lending experts believe that racial discrimination also plays a part.

For example, a loan officer might tell white borrowers to improve their credit before submitting an application, be more understanding of alternative forms of income, such as a family member contributing or a side gig, or wait until mortgage rates fall a little so their monthly payment is lower. The latter would increase such borrowers’ shot at getting a loan. But a loan officer may not do the same for customers of color.

“Some of it is decisions being made by the lending officers,” says sociology professor Lincoln Quillian of Northwestern University in Evanston, IL. “They have powerful stereotypes of who is likely to repay loans.”

Black and Hispanic borrowers often pay more for their mortgages

Black and Hispanic borrowers were more likely to receive higher mortgage interest rates on their loans—which can add up to big money over time.

About 59% of white borrowers and 52% of Asian borrowers received rates within 1 percentage point of the best (i.e., lowest) possible rate. However, only 51% of multi-minority race borrowers, 47% of Hispanics, and 44% of Blacks fared as well. (It’s unknown whether some of these borrowers pre-paid or bought down their interest rates during the closing process.)

Even the smallest differences in rates can really add up. A single percentage point difference can lead to a larger monthly mortgage payment and tens of thousands of dollars more paid out over the life of a 30-year fixed-rate loan. (The exact difference depends on the purchase price of the home, the exact mortgage rates, and the size of the down payment.)

A recent study found that wealthier Blacks were given higher mortgage rates than low-income whites.

Black households making between $75,000 and $100,000 a year were saddled with a median 4.215% mortgage interest rate in 2019, according to a report from the Joint Center for Housing Studies at Harvard University. However white households earning $30,000 or less had a lower median mortgage rate of 4.16%. The study looked at 2019 U.S. Census Bureau data.

Even Black households raking in $100,000 a year or more paid slightly higher interest rates, 4.169%, than low-income whites. Whites with six-figure incomes had median 3.946% rates—about 22 basis points less than Blacks who were also earning $100,000 or more.

“We have some deep problems in the mortgage market,” Raheem Hanifa, a research analyst at the center who wrote the study.

“Some of the differences in mortgage [costs] is due to differences in who the lenders are. There’s evidence that Black and Hispanic buyers are more likely to be marketed to by lenders who are higher-cost,” says sociology professor Quillian. “White and Asian borrowers are more likely to go to traditional banks.”

Predatory lending and the proliferation of subprime mortgages doled out to communities of color led to the last housing crash, and plunged the world into a financial crisis more than a decade ago. But at least some of today’s pricier lenders may simply be smaller operations that need to charge more since they’re not dealing with the economies of scale of the bigger banks.

People of color more likely to be denied loans due to debt

Minorities are more likely to be denied mortgages due to their debt. Before deciding whether to grant loans, lenders look closely at potential borrowers’ debt loads. Their goal is to make sure borrowers can afford to pay back their credit card, student loan, car, and other payments—on top of a mortgage.

Only 1.6% of potential whites borrowers had their applications rejected because of their debt loads—compared with 2.5% of Asians, 3.1% of Hispanics, and 3.8% of Blacks. About 3.7% of multi-minority race applicants were also rejected.

While that does not sound like that much of a difference, it means that 1 in 64 white applicants is denied versus 1 in 26 Blacks.

Some minority borrowers may simply carry more debt than white borrowers. Many face discrimination in the workplace that can manifest in lower salaries and fewer promotions. Also, they may not receive the same level of financial help from their families when they get into a tough financial spot.

Black households were more than twice as likely to have student loan debt than white households, according to a recent report from the National Association of Realtors®. About 43% of Black households had student debt, at a median $40,000, compared with 21% of whites, at a median $30,000 in student debt. (The report was based on a survey of more than 8,200 home buyers who purchased a primary home from July 2019 to June 2020.)

Employment and credit histories also led to higher mortgage denial rates for minorities

Blacks and Hispanics were also more likely to be denied a loan due to their employment history. One in 568 white applicants was rejected due to their work history, compared with 1 in 282 Blacks.

“People of color, notably Native Americans, Blacks, and Hispanics, face higher rates of discrimination in hiring,” says the Urban Institute’s Theodos. “It can be more difficult to be promoted or advanced.”

That plays a big part in how much they’re earning. In 2019, Asian households had the highest median incomes of $98,174, followed by non-Hispanic white households at $76,057, according to U.S. Census Bureau data. Hispanic households had a median income of $56,113, while Black households brought in the least, at $45,438.

Blacks and Hispanics are also more likely to lose out on a loan due to their credit scores. About 0.6% of Asians and 1% of whites were denied due to their credit histories compared with 1.6% of Hispanics, 2.9% of Blacks, and 2.4% of multi-minority races.

Typically, people build good credit by paying off their student loans, car loans, and credit card bills on time each month. However, many lower-income Americans are less likely to have graduated from college or have credit cards. And what folks do pay every month—their rent, utility, and cellphone payments—often aren’t counted toward credit profiles.

“It’s not just discrimination today that is why we see denials at higher rates for Blacks and Hispanics. It’s the byproduct of generations of systemic racism,” says Theodos. “We have a long way to go in overcoming the deep, historical divide of opportunity for people of color in this country.”

Source: realtor.com

New program puts Black real estate agents at forefront

The National Association of Real Estate Brokers and HomeLight has announced the creation of its “Black Real Estate Agent” program to provide financial, educational, and career support for aspiring Black real estate agents.

HomeLight is partnering with NAREB in this venture with the goal of ultimately improving the rate of homeownership for Black Americans across the country, according to Antoine Thompson, NAREB national executive director.

Black Americans represent less than 6% of all real estate professionals in the U.S., according to the Census Bureau.

“This initiative works to close the income and racial wealth gap in the industry,” Thompson said. “Together we’re holding open the door that would otherwise remain closed to Black professionals and consumers.”

Homeownership rates for Black Americans dipped to 44.1% in the fourth quarter of 2020. That’s despite an overall rise of 0.7% in homeownership in the fourth quarter of 2020.

As part of the Black Real Estate Agent program, HomeLight and NAREB will help cover up to $5,000 of the onboarding costs for new agents, including pre-licensing classes, agent exams and select marketing and technology needs. Each program participant will be paired with an experienced NAREB real estate counselor who will serve as a mentor and advisor.

The NAREB is seeking applicants in the United States who are between the ages of 18 and 35, are interested in a career in real estate but not currently established as an agent, willing to work with a NAREB broker during at least their first year in real estate, and committed to spending five to 10 hours per week working with mentors or on continuing education.

NAREB President Lydia Pope said “democracy in housing” cannot be reached without an increase of Black real estate professionals.

“Agents are the frontline and introduce homeownership to prospective clients,” Pope said. “We are confident that this new program will not only equip Black American program participants with the knowledge and practical experience to become top producers in their communities, but also significantly expand Black homeownership in their communities.” 

Black homeownership rate was the only demographic to decline year-over-year, according to the Census Bureau. White Americans increased homeownership in the fourth quarter to 74.5% – a nine-year high. Hispanic-American homeownership rose to its highest rate in three years, at 49.1% last quarter. Asian, Native, Hawaiian, and Pacific Islander homeownership was reported at 59.5% – up from the rate of 57.6% in the fourth quarter of 2019.

A report by Morgan Stanley showed that equalizing Black-White homeownership rates over the next 10 years would create more than 5 million more homeowners of color, generate nearly 800,000 new long-term jobs, and raise up to $400 million in additional tax revenues relative to current trends.

“Our goal is to drive sustainable, structural change by increasing access to job opportunities as well as education around how systematic racism has impacted the real estate industry,” said Sumant Sridharan, HomeLight COO. “We’re excited to partner with NAREB to offer this program to aspiring Black real estate professionals. Together, we believe we can fundamentally shift diversity and equality in our industry by increasing access to training, education, and support for Black real estate agents.”

Source: housingwire.com

Biden tells HUD to reassess its Fair Housing policies

New U.S. President Joe Biden has put racial equality in housing at the top of his agenda in his first week in the White House.

On Tuesday he signed several executive orders, including one that directs the Department of Housing and Urban Development to reassess the impact of regulatory actions on fair housing policies and laws. It orders the HUD to ensure that the requirements of the Fair Housing Act are being followed.

The Hill reported that Biden’s order states that the Fair Housing Act “requires the federal government to advance fair housing and combat housing discrimination, including disparate impact discrimination that appears neutral but has an unjustified discriminatory effect in practice.”

Disparate impact is a legal doctrine that enables courts to consider certain policies and practices discriminatory if it is found that it has a disproportionately adverse impact on any group based on race, national origin, religion, sex, familial status or disability, and there is no legitimate business necessity for that policy. The U.S. Supreme Court found in its “Inclusive Communities” decision in 2015 that disparate impact is a cognizable form of discrimination within the Fair Housing Act.

Under President Donald Trump, the White House revised the HUD’s interpretation of the disparate impact rule, making it more difficult for plaintiffs to prove discrimination under this theory of proof, The Hill reported. Last year, a federal judge blocked the HUD from implementing that new rule.

Biden’s executive order calls for the HUD to reassess and determine if the disparate impact rule decreed under Trump hurts any group’s access to fair housing, and whether or not it should return to the previous standard.

Biden last week signed a series of executive orders that demanded the federal government “pursue a comprehensive approach to advancing equity for all”.

“The nation is ready for change,” Biden said on Tuesday. “But government has to change as well. We need to make equity and justice part of what we do every day … Again, I’m not promising we can end it tomorrow, but I promise you: We’re going to continue to make progress to eliminate systemic racism, and every branch of the White House and the federal government is going to be part of that effort.”

Source: realtybiznews.com

With Democrats in power, will CRA be expanded to nonbanks?

WASHINGTON — The election of President Biden and turnover in leadership of the federal banking agencies not only means a new regulatory approach to implementing the Community Reinvestment Act. It could shine a brighter light on Congress potentially expanding the law to nonbanks.

A legislative effort led by Democrats to subject fintechs and other unregulated institutions that offer banking services to CRA exams would be an uphill battle, and some observers say lawmakers are not likely to focus on such a proposal anytime soon.

Yet Biden supported a CRA expansion during the presidential campaign to cover nonbank mortgage providers and insurance companies. A policy brief released by his campaign last February said the CRA currently “does little to ensure that ‘fintechs’ and non-bank lenders are providing responsible access to all members of the community.”

Just as the bank regulators weigh fundamental changes to the CRA exam process, industry representatives and community advocates have long argued for extending CRA standards to financial institutions other than banks. And some Democrats such as Sen. Elizabeth Warren, D-Mass., have pushed for legislative approaches expanding CRA to a broader array of companies.

“It’s time to look at how those entities can best demonstrate that they serve their entire communities,” said Krista Shonk, vice president of regulatory compliance and policy of the American Bankers Association.

Others say financial services companies that generally receive benefits from the government should be held accountable for their level of investment in their respective communities.

Jesse Van Tol, CEO of the National Community Reinvestment Coalition, said it is feasible that Biden and his Democratic allies in Congress may pursue some kind of legislative package focused on addressing racial inequities, and that the inclusion of CRA-like obligations for nonbank financial companies could be folded in alongside other initiatives.

“I think almost every financial services company is the product of, or in some way the beneficiary of, the government infrastructure that regulates them,” Van Tol said.

In the same way that the government can point to federal deposit insurance and chartering as exclusive government benefits for banks that warrant greater responsibilities, he said, the trillions of dollars distributed by the government to large companies in the wake of the pandemic could come with similar strings.

“There’s a lot of evidence that many financial markets, especially mortgage markets, are essentially propped up by the government,” Van Tol said. “That means a rationale is there for requiring something in return.”

Biden’s campaign said the then-candidate “will expand the Community Reinvestment Act to apply to mortgage and insurance companies, to add a requirement for financial services institutions to provide a statement outlining their commitment to the public interest, and, importantly, to close loopholes that would allow these institutions to avoid lending and investing in all of the communities they serve.”

However, with everything else on the policy agenda — including fighting the brutal economic effects of the pandemic — some aren’t holding their breath that a legislative overhaul of the CRA will happen anytime soon.

“I don’t think, realistically, that it will happen in the next couple of years” said Van Tol.

A legislative focus on CRA could be combined with broader policy questions about fintech regulation, including whether states or the federal government are better positioned to charter and supervise nonbanks that increasingly want access to the banking system.

But despite Democrats’ victories that gave them control of Congress, the margin in the Senate is razor thin with Vice President Kamala Harris holding the tie-breaking vote.

“You’ve got a really tight margin when you need every single Democrat voting for something,” Van Tol said.

And some Republican support is necessary for standalone bills that can be blocked by filibuster. Analysts also doubt a CRA bill could be attached to any must-pass budget bills that only require a majority in the Senate.

“In an ideal world, Congress would focus on the fundamental frictions with federalism and fintech, which would include a thoughtful consideration of everything from chartering to CRA requirements,” said Isaac Boltansky, director of policy research at Compass Point.

“Needless to say, we do not live in an ideal world and I am bearish on legislation via regular order,” he added.

Since the passage of the CRA in 1977, banks have been required to provide financial services to local communities with “low-to-moderate income,” a technical term based on Census data. But in recent decades, banks have lost significant market share of financial services to nonbanks, which advocates say has diminished the impact of the CRA nationwide.

Both times the law has been meaningfully reformed — first in the 1990s and most recently under the Trump administration — calls followed to expand the law’s obligations to nonbanks, including credit unions, mortgage lenders and most recently, fintechs.

Analysts say that the impact of such changes could be significant.

According to the Mortgage Bankers Association, the market share for mortgage originations among nondepository institutions grew from 24% to 58% between 2008 and 2019.

Between 1990 and 2018, the banking sector’s share of 1-4 family mortgages dropped from 40% to 24%, according to analysis by the Federal Deposit Insurance Corp. In that same period, banks’ share of multifamily residential mortgages dropped from 44% to 33%, and in consumer credit, the figure fell from 52% to 42%.

“We’re talking about how the financial services marketplace has evolved and is still evolving at a rapid pace,” said Shonk of the ABA. “We’re not limited to the days of having to go to the local bank, and more and more assets are being held by nonbanks of various sorts.”

Boltansky said despite the national focus on ending racial inequities, which could address strengthening the CRA, the still-simmering political divisions in Congress make legislation unlikely.

“The [Community Reinvestment Act] is clearly part of the broader economic justice conversation, and we should expect headlines and proposals,” said Boltanksy, “but I need to see a demonstrable thaw in our political discourse before becoming bullish on” such a plan moving forward.

Other challenges to expanding the CRA are structural and go deeper than political will. As written in 1977, the statute is a piece of banking law, analysts stress, making it difficult to simply drag and drop other industries into it.

“The CRA is built around the concepts of deposits and bank branches,” said Randy Benjenk, a partner at Covington. “When Congress passed the CRA, it was concerned that banks were taking deposits from low-to-moderate-income communities without lending back in. But mortgage and insurance companies don’t take deposits, and they don’t have branches in the CRA sense.”

“Without the concept of deposits, it’s not clear how you would measure CRA obligations. You can create a regime that doesn’t include those concepts or has a substitute, but you’d be starting from scratch,” Benjenk said.

Source: nationalmortgagenews.com