November 8, 2022
Bank of America recently announced a new loan program called the Community Affordable Loan Solution. The new loan is offering first-time homebuyers in select Black and Hispanic communities a zero-down payment program in the hopes of increasing homeownership among Black and Hispanic buyers, as both Black (43.3%) and Hispanic (51.1%) homeownership rates remain well below the rate of white homeownership (72.1%).
Along with offering a zero-down payment, the program requires no minimum credit scores or mortgage insurance.
AJ Barkley, the head of neighborhood and community lending for Bank of America, explained that homeownership strengthens our communities and can help individuals and families build wealth over time. Our Community Affordable Loan Solution will help make the dream of sustained homeownership attainable for more Black and Hispanic families.”
The Community Affordable Loan Solution will be available in Charlotte, Dallas, Detroit, Los Angeles, and Miami. Eligibility for the program in these select cities will be based on location and income.
There is no doubt that Bank of America is trying to increase minority homeownership with the Community Affordable Loan Solution. This is encouraging, especially given Bank of America’s history of charging Black and Hispanic borrowers higher rates than white borrowers (resulting in $335 million in penalties against the company), steering them into riskier loans than white applicants, and approving Black applicants at a rate 12% lower than white applicants as recently as 2020. However, one cannot help but wonder if this is just a new version of redlining.
Redlining has been a historical hardship for minority communities across the United States. The discriminatory practice of redlining led to generations of residential racial segregation and urban decay, causing adverse health and financial inequalities for primarily Black and Hispanic communities in major cities in the United States.
The Community Affordable Loan Solution could perpetuate these same inequalities, as the eligible participants will likely only have the opportunity to purchase homes within the communities they already reside.
This new program could inadvertently keep minority populations in these redlined communities. We will improve when Black and Hispanic homeowners can freely move to the areas of their choosing where they can pursue financial opportunities, benefit from strong schools, and meet the specific needs of their families.