Bank of America piloting no-down payment mortgages

Program targets first-time buyers in Black, Hispanic neighborhoods

A photo illustration of Bank of America CEO Brian Moynihan (Getty Images)
A photo illustration of Bank of America CEO Brian Moynihan (Getty Images)

Bank of America is attempting to close the disparity between Black and white home ownership with a pilot program aimed at helping first-time buyers in Black and Hispanic neighborhoods.

The bank’s Community Affordable Loan Solution trial program will offer mortgages to first-time homeowners in certain predominantly Black and Hispanic neighborhoods, the New York Times reported. The program is being tested in several cities, including Dallas, Los Angeles and Miami.

Applicant eligibility will be determined by income and location. Buyers won’t be required to make down payments, closing costs or provide minimum credit scores. They also will not need to have mortgage insurance.

The bank hopes to expand the program to other cities, in addition to educational resources on homebuying.

Historically, non-white buyers have a more difficult time meeting the criteria to buy a home, as they are largely excluded from opportunities to build credit or accumulate generational wealth. The U.S. Census Bureau reported the rate of white homeownership was 75 percent in the second quarter, versus only 45 percent for Black homeownership.

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Government and bank activity has largely exacerbated the problem. Redlining, the practice of denying mortgages to residents in neighborhoods deemed to be in risky investment areas, has been outlawed but has persisted in practice. The areas picked out for redlining disproportionately affect homeowners of color, who struggle to get government-backed loans or earn only a fraction of home equity seen in greenlined neighborhoods.

A Bloomberg News analysis showed Wells Fargo approved only 47 percent of refinance applications sent in by Black homeowners in 2020, well below the 71 percent acceptance rate from other lenders combined. The bank, meanwhile, approved 72 percent of applications from white homeowners.

Bank of America previously had its own issue with discrimination in the mortgage market. In 2011, it agreed to pay $335 million to settle a case with the Justice Department involving allegations that subsidiary Countrywide Financial charged higher rates and fees to Black and Hispanic borrowers due to their race or national origin.

— Holden Walter-Warner

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