Bank of America Corp. is getting a mixed reaction on social media to a no-down payment mortgage program aimed at bringing first-time homeownership closer to more African-American and Hispanic families.
Readers’ comments on Bank of America’s new affordable community lending solution often compared the program to subprime loans, which collapsed as part of the global housing meltdown that in turn precipitated the financial crisis of 2008.
Others applauded the move as a way to address declining Black American homeownership rates between 2010 and 2020.
The banking giant BAC,
unveiled the new loan product earlier this week. It is described as a special purpose credit program tested in select markets, including Charlotte, Dallas, Detroit, Los Angeles and Miami.
In addition to no down payment, the program offers no closing costs for first-time home buyers, no mortgage insurance or minimum credit score required.
“Is it an adjustable rate mortgage? Because black neighborhoods have already been devastated by predatory lending,” @mcdpeach said on Twitter in reaction to an NBCNews story about the bank’s mortgage program. “I trust BoA as far as I can cast him.”
@Armanwalker said black homeownership rates remain at their lowest levels and the housing gap has grown. “It’s not predatory lending,” @Armanwalker said.
A Twitter user called @Benhem612 raised questions about whether the Bank of America program will be combined with protections to prevent homes being sold for “penny on the dollar”.
Twitter user @CamTsn compared the program to Ninja Loans, which are loans given with little or no attempt to investigate repayment capacity. “What a great idea, offering Ninja 2.0 loans at the top of a real estate bubble,” said @CamTsn. “I am absolutely sure that this will not have a negative impact on minorities and their communities.”
In describing its new mortgage program, Bank of America said it assesses mortgage eligibility based on rent, utility bill, phone, and timely car insurance payment, homebuyers required to complete a certification course with approved housing advice partners, prior to application.
The bank’s mortgage effort comes as the U.S. Federal Reserve and other banking regulators work to update the Community Reinvestment Act (CRA) in a bid to boost homeownership rates in low-income areas. One of the objectives of the updated CRA is to promote special purpose credit programs aimed at stimulating lending.
While the overall homeownership rate in the United States jumped 1.3% to 65.5% in 2020, the rate for black Americans fell to 43.4% in 2020 from 44.2% in 2010, according to the National Association of Realtors. The homeownership rate among African Americans remains nearly 30 percentage points lower than the homeownership rate of 72.1% among white Americans.
Bank of America said the affordable community lending solution adds to its community homeownership commitment to provide $15 billion in mortgages by 2025, with a goal to help 60,000 individuals and families. to buy houses.
The Charlotte, North Carolina-based bank has also committed an additional $15 billion through May 2027 to the Neighborhood Assistance Corporation of America (NACA) to provide mortgages to low- and middle-income homebuyers.
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Bank of America stock, which was down 1.7% on Thursday morning, has lost 10.5% over the past three months, while exchange-traded fund SPDR Financial Select Sector XLF,
lost 6.6% and the S&P 500 SPX index,