Bank of America just launched a zero down payment mortgage in 21 cities
businessinsider.com
businessinsider.com
Personally, I'd say that the ''bankers'' are using the guise of ''helping the people of color'' to actually prey on them. This is a slam dunk setup for another government bailout (''Help us Uncle Sam, so many people defaulted on their loans, nobody could see this coming.'') as well as taking control of lots of property during the next economic downturn.
On a side note, I can’t imagine a better reason for a government bailout— if it results in tens of thousands of first time buyers owning a home, many of whom would continue to do so regardless of the bailout.
That's what I was asking for above. Both the media reporting about this and even their own press release makes this story a bit ambiguous.
> so your insinuation is actually racist.
Normally I'd smirk in being called racist for advocating treating all races equally, but I'd like to simply state that the media reporting on what this program actually is has been extremely confusing. That's why I asked what this program was for up above and pointed out that a program that treated different races differently would be racist.
> On a side note, I can’t imagine a better reason for a government bailout— if it results in tens of thousands of first time buyers owning a home, many of whom would continue to do so regardless of the bailout.
I view this as penny-wise and pound-foolish thinking. The resulting economic fallout of getting people in homes that they can't afford in a downturn and the resulting bailouts that would happen is much worse for most poor people in the long-run.
Feels like the reverse of offering a product only in a certain area should be true.
I've heard this said a lot of times, but this feels more like a slogan than an actual data point to me. Bad statistics are endemic in these sorts of discussions. Is this statistic comparing all Black people to all White people or is this a clear apples-to-apples comparison?
And where do other races like say Asians fit into this here? Apparently, Asians make even more in America than average White people (according to stats I've seen) so do they get better loan terms than White people? And if they do, is it because of their race, or because they make more money? If racism exists, is it affecting Asians in the same way? And if not, why not?
I'm not going to completely dismiss your comment and I want everybody to do well, but I think it merits a much deeper investigation for full understanding.
Wikipedia articles are not really vetted by any authority nor are the sources. Anyone can simply add citations to claims; there are no standards for what constitutes a valid source other than a URL exists to some resource.
You can even take a benign article about something that is not political and start clicking through the sources and realize a lot of them don't support the claim they were cited to support on Wikipedia. In my experience, its less than half the sources I've clicked on are credible and support the claim but this is anecdotal. A lot of Wikipedia is editing by people with ulterior motives now that its so often presented and received as fact.
I point out the primary sources part of Wikipedia especially because I very much understand Wikipedia is edited by humans with all their quirks and faults and it is worth not just starting at Wikipedia, but also all that "boring footnotes part" at the bottom of almost every Wikipedia page. Even if it has the same problems as the rest of the data in Wikipedia, it's still so much more information beyond the top-paragraph summary which is all many people ever read of Wikipedia. But critically, that's the part of Wikipedia that most embodies the "Reading Rainbow spirit" of "but you don't have to take my word for it". That's where Wikipedia itself reminds you that it isn't the final word on a subject, but the first word, the summarizing word on it, and points you to other places to explore.
Even if "less than half the sources are credible", a .490 can be a startlingly good batting average, depending on if you are talking Baseball or Cricket. In this specific case 50% of 107 is still a chance at maybe 54 good and worthwhile and credible supporting claims. That's still 54 different places more to start your own research with than you had before you got to the Wikipedia page. Even though anyone can add citations to claims, it's still far more organized than "let me google that for you" because it's still likely human curated and not just whatever SEO has made the machine algorithms happy this day. It's still a good suggestion to start there with those sources. If you are arguing that you maybe shouldn't stop there, then absolutely, I agree, but the above poster was asking where to start, and the poster above that gave them one place to start with 107 leads of further places to start. I thought that was a useful reminder, regardless of what you think the overall batting average of Wikipedia is.
That's the same bad statistical approach that lets activists claim that women make a fraction of what men make: they compare the incomes of all women to all men rather than taking into account individual choices, education, career fields, etc. When you do a good comparison (comparing women with equivalent careers, education, ages, etc to men) the wage gap between men and women is blurred.
For this question about Black loans, all I'm interested in is an apples to apples comparison. Compare loan rates of Black people in X career with X education making $XXX with XXX+ credit scores to the White, Latino, and Asian equivalent. That's the better approach to see if bias exists. Does that study exist? You tell me because I'd be interested in it.
That "perfect" study you are looking for in fact can't quite exist because you can't control for all variables with respect to any systemic issue and variables like career and education are likely too deeply connected co-factors with housing.
It doesn't sound like you have any interest in being convinced, and it sounds like you are happy being a contrarian here.
It's easy to claim all of the evidence in the world exists when you're willing to accept very bad statistics and interpretations.
See how that works?
I'm very simply asking for something other than very obvious bad statistics or bad statistical interpretations. I think this is very important because bad stats or interpretations can cause bad policy decisions.
> Sociologists don't get clean room labs and from scratch experimental design for their studies and have to work with the available data.
Are you saying that this data can't exist, or can't even be attempted to be found? No sociologist has thought to even attempt to come up with a sample of this data to try and analyze this correctly? If this is the case, why?
> That "perfect" study you are looking for in fact can't quite exist because you can't control for all variables with respect to any systemic issue and variables like career and education are likely too deeply connected co-factors with housing.
Hold your horses, buddy. I'm not looking for some fictional "perfect" study. Every study, whether in physics or sociology, probably has flaws. I'm not looking for perfection, I'm looking for an honest attempt to at least make a good statistical comparison.
> It doesn't sound like you have any interest in being convinced, and it sounds like you are happy being a contrarian here.
Mind-reading isn't a thing, but I'm generally a happy person, thank you.
"WhY cAn'T i GeT fReE fOoD???? This is class discrimination!"
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First, the no down payment means that the borrower would have no equity in the home. Most mortgages are very front loaded with interest. If something were to happen in which the borrower had to get out from the house/loan they would be in a very precarious financial situation since the seller is responsible for the agents' fees and commission.
Second, and I may not be sure how this works, but no closing costs means that presumably there isn't an escrow account set up with any prepaids such as taxes. The article doesn't really touch on this but worse case scenario this means that the borrower could be surprised by huge tax bills?
Third, if the bank is not using credit score, and is taking on all the risk by issuing loans that are 100% LTV, I can't imagine the interest rates are going to be favorable to the borrower which kind of exacerbates my first point above, where the borrow is going to be making huge interest payments and not building any equity.
Bank of America is not stupid and they are certainly not a charity. To me this seems kind of predatory. I am sure they have run the numbers on what the risk is, how many borrowers they expect to default, what they anticipate making, etc. If this isn't predatory towards black or latino people, they should release those numbers.
And depending on the market, down payments may not be large anyway. People with higher credit scores (honestly not that high) can get an FHA loan for as little as 3.5% down. That's not that significant, especially compared to 10-20%.
Re: being surprised by a big tax bill, BofA is running this program under its Community Homeownership Commitment, all of the programs under which provide--and sometimes require--new homeowner financial education.
Re: interest rates, the existing Affordable Loan Solution loans (again under the same Community Honeownership Program) are around .25 and .5 points higher than comparable normal mortgages. That's significant, but hardly predatory, and they're all fixed rate and have caps on LTV (105%).
I mean, I'm also distrustful. I feel like a bank shill, which is pretty uncomfortable. I believe their policies have immiserated and killed people knowingly, and they should probably be regulated out of profitability. But this program seems like what most people in the field have been advocating for for a while: lower barriers, educate and support people, help them start building wealth in their homes and grow their communities.
[education]: https://homeloans.bankofamerica.com/affordable-lending
[community homeownership commitment]: https://promotions.bankofamerica.com/homeloans/homeowner
[community affordable loan solution]: https://newsroom.bankofamerica.com/content/newsroom/press-re...
[rate]: https://www.freeandclear.com/resources/mortgage-insights/ban... (not the best source, but best I could find)
Even if open to all people, this is a clear case of disparate impact [1], which runs afoul of the Civil Rights act. But I wouldn't hold my breath for an even application of the law.
Prior to the 2008 housing crisis Bush made big push for home-ownership ("ownership society") for everyone, and we saw the subsequent hordes of zero down payment mortgages, etc.
1. provide wealth to it's residents 2. fix crime and blight 3. help alleviate housing affordability crisis
Right now, a troubled area might have housing wealth be 1/4 of a nearby affluent area. But generally, this is simply because of crime and bad schools due to the cycle of poverty. If you're able to quickly alleviate the crime and poverty, suddenly that troubled area is basically as desirable for housing as the rest of the area.
Now, usually, this "gentrification" process has happened slower, over decades, and without the corresponding wealth accrual of its current residents. So it doesn't work out for the current residents and the clash between people is much harsher.
But what if all the wealth that was created when a $300k East Oakland home becomes $1m, was equally shared between investment and residents? Could you pay people (give them some type of community job) and/or make sure everyone has housing equity, to break that cycle, stop the crime, so that everyone wins?
It feels doable if tackled on a large scale, what am I missing?
What makes the schools bad, if they receive on-average marginally higher per-pupil funding than mostly-white schools [1]?
[1] on average, both Black and Latinx total per pupil expenditures exceed White total per pupil expenditures by $229.53 and $126.15 - https://journals.sagepub.com/doi/full/10.1177/23328584198724... - I can't find a source now, but the average per-pupil funding is around $20,000, so a difference of $200 is negligible.
If you're surprised that the funding is almost the same, despite schools being funded by property taxes, which are much higher in whiter neighborhoods, that's because you were hoodwinked by the media. Schools are funded by local property taxes and state taxes, with the latter distributed to even-out the funding. For some mysterious reason, the latter funding source receives much less coverage than the former.
Don't get me wrong, money does play an impact, but only when the families have it. When families are wealthier their kids do better even if their school is getting less funding than some of these schools in poor areas.
Mostly I assume that if Bank of America thought they could make money doing what you say, then they'd probably be doing it already. If they'd lose money on it, then there's no way they'd do it. That's one of the ways that American companies are just refreshingly simple.
On another note - I really don't understand what housing wealth is supposed to do for people. My house has increased in value around 200% in the last decade. And? Sure I've got more money on paper, but what am I supposed to do? Sell it and live in my car? (I think I could pull off van life maybe.) All that's happened is I have to pay ever more in property taxes.
> The GOP was in the White House when the Housing Bubble was brewed up in 2002–2005. President George W. Bush strongly pushed the finance industry to lend more to nonwhites at his Oct. 15, 2002, White House Conference on Increasing Minority Homeownership. There he told his federal regulators not to worry so much about traditional credit standards regarding down payments and documentation of income because he wanted to see 5.5 million more minority homeowners by 2010. ...
> Angelo Mozilo, CEO of Countrywide Financial...wanted to boost Countrywide’s share of the national mortgage market from 10 percent to 30 percent. He believed he could safely do that by increasing lending to marginal customers, especially Hispanics. ... In 2003, Mozilo, citing Bush’s push for minority home ownership, pledged to a Harvard audience that Countrywide would lend $600 billion to minority and lower-income borrowers by 2010. In 2005, he boosted that promise to one trillion dollars. ... Countrywide went under in 2008. ...
> For example, a 2015 paper by Lin, Liu, and Xie found that in a sample of 18,000 households: The difference in the mortgage delinquency rates between immigrants (15.7%) and natives (4.4%) is significant.
> Similarly, a 2013 paper by Luea, Reichenberger, and Turner revealed 2009 default rates for whites of 3.4 percent, blacks 11.3 percent (3.3 times the white rate), and Hispanics 16 percent (4.7 times the white rate)
> A 2013 paper by Reid featuring data from the fifty largest metro areas for mortgages originated just in 2005 shows that foreclosure rates by 2009 were twice as bad for blacks as whites and almost three times as bad for Hispanics as whites. By 2010, 10.5 percent of Hispanics were in foreclosure versus 4 percent of whites.
> According to Zillow, Hispanic neighborhoods nationally exploded in price by 280 percent from 2000 to 2006 versus about 160 percent for white neighborhoods. Remarkably, by the peak of the Bubble, the median home in a Hispanic neighborhood was worth almost a hundred thousand dollars more than the median home in a white neighborhood. Not surprisingly, the decline in home value from peak to trough was almost twice as severe in Hispanic neighborhoods as in white neighborhoods.
> In summary, immigration was seen as a vast boon to the housing market until it turned out that Hispanics tended not to be able to afford the huge mortgages they had been given. At that point in 2008, housing prices in several high-priced Hispanic-heavy states, such as California and Florida, plummeted, taking down financial institutions like Lehman Brothers, Washington Mutual, and Countrywide Financial. This carnage set off a national recession even in places without a Housing Bubble.
> Santayana famously said, “Those who cannot remember the past are condemned to repeat it.” But what if you haven’t forgotten it because you never had a clue in the first place?
Not to be all Eeyore, but it's a little exhausting to have any post about any race-conscious action get bogged down by commenters who haven't even read the Wikipedia pages for racism and reverse racism. There's an interesting discussion to be had about these kinds of policies:
- housing as infinitely growing store of wealth is probably bad, is it a good idea to get more people on that train? Is it unfair to effectively bar Black and Latino mortgage seekers from the gravy train?
- is it a good idea to do this now, as we're descending further into a housing crisis, or are these markets more liquid than others
- what are other non-credit-score measures of creditworthiness? Is credit even a good idea? Should the government just back things like mortgages, school, and auto loans?