During the past several years the Black Lives Matter movement has been taken more seriously. Some, genuinely have made an effort to understand its preamble. It has evolved into social consciousness not seen in decades. One issue which has been highlighted from the movement is housing discrimination and how it was strategically used to keep non-whites from reaching their potential to secure home ownership.
Ever since African-Americans were emancipated from slavery strategies, initiatives and even public policy has been used to thwart their progress. Jim Crow was the moniker used to define that period. Even though it has been outlawed, to this day its remnants are still part of our environment. Racial Covenants was the legal process used to keep property from being sold to non-whites. Legislation from the civil rights era outlawed the practice, however even though non-whites or specifically African-Americans were eventually able to purchase property, a slew of other schemes were developed with the goal to create a negative impact.
One of those schemes was called “Blockbusting.” In simple terms it literally means to tear up the block or neighborhood. It was accomplished by telling white homeowners in urban areas to sell their properties to the blacks who were seeking improved housing. The whites were motivated to sell not from some benevolent position of integrating the neighborhood. The opposite; they were motivated to act so they could secure whatever favorable price they could achieve which allowed them to move out.
NPR just released an outstanding and more comprehensive article on this topic and others dealing with discrimination in home ownership.
From Donald Trump pulling the ultimate political hat trick of losing the House of Representatives, the Senate and the Presidency in four years to the Derek Chauvin verdict, to the treasonous behavior of those who stormed the Capitol on January 6, 2021 to the international sea of millions who adopted the Black Lives Matter moniker, our current environment is that of a social reckoning.
Racially-restrictive deeds were a ubiquitous part of real estate transactions. Covenants were embedded in property deeds all over the country to keep people who were not white from buying or even occupying land
Here in the United States a good many of our social ills deal with race and/or class. People who have been sleep a good portion of their life have awakened. Some ponder the question of the racial disparities placed right on their doorstep. Racism is an institutional construct. In other words the system was created and in many cases codified into law.
The wealth gap presents great data for our divide. On the other hand another element to maintain the gap was racial covenants regarding home or property ownership. They were a tried and true method to keep minorities, specifically those of African descent from purchasing property. It was a little secret but it was law (until in was struck down in 1968) and since it dealt with ownership or property rights, it was part of the official title record. Even though we are in 2021 and the majority of homeowners have no idea of its existence (I mean, who has the time or experience to read a title report?). But, if you ever have the time and look, it is there and its purpose was to legally restrict who could purchase property.
Today the Los Angeles Times explored the topic in greater detail. So, I would encourage you to educate yourself of how these elements created the racial disparities that is current social discussion is attempting to correct.
The above headline is what scares the hell out of would-be homebuyers. As real as the numbers are they are just another hurdle which must be navigated to achieve homeownership.
In December, the statewide median home price was $717,930, up 16.8% from December 2019. But the high prices are not driving buyers away.
The notion of buying a home at $700,000 is one factor which scares many potential buyers into paralysis. While financing is attractive there are hurdles which cause some to simply throw in the towel before even trying. Make no mistake, the aspiration of purchasing a home can be a daunting experience. Several important factors to consider:
The story projects great news for those who have succeeded in purchasing a home during this worldwide pandemic. But who has the $140,000 or even $70,000 or $35,000 required down payment stashed away?
Using the “average” sales price as a barometer, how many first-time, would-be buyers can afford a monthly mortgage payment of approximately $3,700?
Further, based on the above how many “average” people have the income to qualify for a mortgage? Using the above illustration you would need a combined annual income of approximately $115,000.
THE BOTTOM LINE
There is no need to stay discouraged. Even in the best of times acquiring a home requires planning, persistence and laser-focused attention on succeeding. While the numbers are the numbers the fascination in purchase a home is there is the “average” and then there are options. It may mean you will have to do more research. Think out of the box. Be creative. All, with the focus of getting in, somewhere!!!!!! The one constant is however you achieve it, homeownership is a coveted goal and despite the nerve-wracking numbers in the long-haul you can position yourself for financial mobility while meeting a very basic demand………securing shelter.
The last critical point is to network and align yourself with professionals who can help to minimize the myths and set you on the path to achieve, and that may not be the $700,000 home but whatever it may be, it will be yours. Why? Because not everybody sells for the same reason or has the same motivation other than to sell to the buyer who can meet their price and their timeline.
above photo Mel Watt, director of the Federal Housing Finance Agency (FHFA), from left, Jerome Powell, chairman of the U.S. Federal Reserve, Steven Mnuchin, U.S. Treasury secretary, and Jay Clayton, chairman of the Securities and Exchange Commission (SEC), listen during a Financial Stability Oversight Council (FSOC) meeting at the U.S. Treasury in Washington, D.C., U.S., on Tuesday, Oct. 16, 2018. Powell said at the meeting he is worried about a spillover from hard Brexit, but stocks and Treasuries showed little reaction. Photographer: Andrew Harrer/Bloomberg via Getty Images
Today, the Federal Housing Finance Agency (FHFA) announced conforming loan limits would increase from $453,100 to $484,350. For higher cost areas (see map below) the new limit will be $726,525. FHFA was created as the umbrella agency for the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
They purchase home loans from a network of lenders across the nation. The lenders originate the loans from consumers who are seeking to finance their home purchase or to refinance their existing mortgage. The lenders also work with mortgage brokers, credit unions and other organizations who have direct contact with consumers.
Once the loans are funded, they are packaged and sent to respective investors (i.e., Fannie Mae and Freddie Mac) and sold as securities, which are backed or collateralized from the property.
Nationally the average loan amount is $229,000. The new guidelines take effect for mortgages that originate starting January 1, 2019. The increase will help those who see home prices continue to rise.
Conforming loans are those where the loan amount is $484,350 OR LESS. Any loan amount in excess of that loan is defined as a “Non-Conforming” loan. For borrowers the impact is typically ½ point or 50 basis points on the interest rate.
As an example based on current limits
The bottom line difference could be approximately $190 each month. So, while the monthly payment is crucial, the move also provides those with higher loan amounts an additional $31,250 to deal higher prices, while being able to obtain more affordable interest rates.
COVER PHOTO. Traders work on the floor at the closing bell of the Dow Industrial Average at the New York Stock Exchange on October 10, 2018 in New York. - Wall Street stocks plunged Wednesday, with major indices losing more than three percent in a selloff prompted by the sudden jump in US interest rates. At the closing bell, the Dow Jones Industrial Average had lost 3.1 percent or 830 points to finish at 25,613.35, in the biggest fall since February. (Photo by Bryan R. Smith / AFP) (Photo credit should read BRYAN R. SMITH/AFP/Getty Images)
Mortgage rates jumped to 4.90% which is a number not seen in nearly seven years based on Freddie Mac’s weekly rate survey. Although an increase was expected the jump of nineteen basis points caught some by surprise. As strong as the economy is purchasing a home continues to be an illusive transaction for many. The rise in rates buffeted by the increase in home prices have left many reconsidering their plans as evidenced by the drop in mortgage applications.
Remember that tax break earlier in the year?
Last December president Trump and the GOP controlled congress touted the tax cut as a “cure-all” and justification of their leadership prowess. Indeed, a good chunk of working people did receive benefits from the tax cut and a few were lucky enough to get bonuses. The average cut was about $1,600.
For those who were positioning to buy a home or refinance their existing mortgage the recent mortgage rate hike has wiped out that savings.
**based on average mortgage of $239,000
Most understand rates and economic metrics are cyclical. In other words when you have an improved economy, you will also see a rise in consumer goods. Also, recently the Feds increased the discount rate. This was done as a preventative measure to thwart inflation. Normally political leaders stay out of the Fed’s business but Donald Trump has continued to intimate their move has contributed to rate increases claiming they will result in a negative impact.
“I think the Fed is making a mistake. They are so tight. I think the Fed has gone crazy,” President Donald Trump
Another pressure-point for the economy is the recent drop in the DOW Jones and financial markets. Business leaders, especially those in the real estate sector attribute the decline to the uncertainty of the Trump imposed tariffs and other measures. They feel recent gains may be wiped out.
“These tariffs will translate into higher costs for consumers and U.S. businesses that use these products, including home builders,” Randy Noel, chairman of the National Association of Home Builders
Today mortgage information provider CoreLogic released its “Annual Fraud Report” documenting a rise in consumer mortgage fraud. The report highlights that recently convicted former Trump campaign manager isn’t the only one who submitted false applications to secure mortgage loans. As in the case of Manafort, mortgage fraud is a federal offense and the penalties can be stiff, including incarceration.
Even though the economy has improved, the rise in home prices and corresponding amount of income needed to qualify for a loan has increased. Although it is a risk management issue the numbers note approximately 1 in 109 applications have some type of fraud. The report reflects the fraud index has increased for the past seven quarters.
Two fraud issues that are top of mind for risk managers right now are false credit disputes and income misrepresentation.
Publishing numbers not seen since 1969, yesterday the Bureau of Labor Statistics (BLS) released its October jobs report. The numbers reflect data compiled for the month of September as unemployment dipped to 3.7%, with new jobs pegged at 134,000. That is good news for the Trump administration as it validates their message of a strong economy. The news was expected and comes at a good time for them as even though they inherited the foundation of a good economy from the Obama administration, they have been mired in a string of self-inflicted blunders ever since taking over the reins.
They view those blunders as attacks from those who are upset they won the 2016 election. Others view them as leaders who are inexperienced at managing a government, fraught with suspicious characters linked to criminal behavior.
In addition to the Mueller investigation, they are dealing with a majority of the public not in support of their United States Supreme Court nominee, Brett Kavanaugh. Earlier today Kavanaugh squeaked by with a 50-48 vote. While there is jubilation from those who support Trump and Kavanaugh, the untold cost may not be realized until the mid-term vote slated for November 6th. Some fear this and other moves by the administration might cost the GOP control of congress.
Trump understands the media dynamic
As September numbers are a positive sign, Trump no doubt will use the data to proclaim the numbers reflect the lowest, specifically among African-Americans and other minority groups. While the numbers are real and give great justification to those who support Trump, it must be noted he is a master manipulator of the spoken-word and you really have to ponder how serious he is about the claim? Or, is he appeasing to the conscious of those who have very little knowledge of the historic perspective of employment gaps between whites and minority groups? Oftentimes they view any news spouted from Trump as near-gospel, certainly not worthy of understanding the overall context of such statements.
Understanding media, Trump has woven unemployment data into his rallies and other talking-points. The issue for some regarding this sentiment is whether Trump is genuine, as his tone appears to mock the point which is a very serious issue for African-American’s who have been systemically unemployed at a rate at least twice that of whites. This has been lingering problem presidents have been dealing with ever since the notion of race entered the American nomenclature. It was created to divide people and groups. While the numbers in fact have declined, the real gap is a constant historical fact; a key metric providing evidence to the wealth gap that highlights the polarization of our nation.
In attempting to proclaim his support for the African-American community, who can forget this quote Trump made while on the campaign trail?
“Oh look at my African-American over here,” Mr. Trump said. “Are you the greatest? Do you know what I’m talking about?”
Indeed, unemployment numbers are down but a nagging question remains which is why is there a disparity with white workers versus other ethnic groups?
“Among the major worker groups, the unemployment rates for Whites
(3.3 percent) declined in September. Blacks (6.0 percent), Asians (3.5 percent), and Hispanics (4.5 percent)stagnation” Bureau of Labor Statistics (October 2018)
The jobs report will continue to boast consumer confidence. However, the issue for many is keeping pace with rising consumer cost. The Fed’s recent rate hike is the reality of a cyclical economy. Some things go up and others go down. As an example, housing prices continues to soar resulting in many who are employed to delay buying a home, simply because the percentage needed from their paycheck to handle the monthly payment has increased year over year.
Here is an example of 1969:2018 – Wages & percentage of income needed for monthly payment.
(cover photo by Mindy Schauer/Digital First Media/Orange County Register via Getty Images)
Reverse mortgages, technically known as Home Equity Conversion Mortgages (HECM) have tougher underwriting guidelines effective October 1st.
The announcement was made by the Federal Housing Administration (HUD) which is part of the United States Housing and Urban Development (HUD) agency. HUD insures the mortgages which are originated by lenders at the consumer level, thus allowing borrowers a tool to utilize the equity in their homes to obtain a loan.
The move essentially means in addition to the initial appraisal used to determine property valuation, a second independent appraisal will now be required. The borrower’s loan will be based on the lower of the two appraisals. In a gesture to appease the borrower’s chagrin of the new requirement, the cost of the second appraisal is allowed to be financed as part of the closing costs. In making the move HUD announced it needed extra protection for the collateral being used to obtain the loan, as it battles with a shrinking insurance pool.
House rich, cash poor
HECM’s have picked up in popularity since the early 2000’s. As people have lived longer lives, it was a statistical reality that many seniors were dealing with a precarious situation. For a variety of reasons their cash reserves were being depleted and the result was a negative impact to their day-to-day living. It was also noted many in that population who were homeowners were sitting on large equity positions. Unfortunately, underwriting guidelines made it prohibitive for them to obtain standard mortgage loans.
HECM’s solved that solution, at least for those who were at least 55 years of age and had sufficient equity. Instead of a regular loan where you make monthly payments, the loan actually provides the borrower income based on the equity position. Paying off the debt was not required until the borrower deceased or it was somehow refinanced.
The new guideline is not expected to thwart the popularity of the program. But, it is one critical guideline that HUD feels will help sustain the viability of the program.
[Expo Park – Los Angeles, CA] Last Thursday the California African-American Museum hosted the final symposium series on gentrification. The event was created by Karen Mack of L.A. Commons. “Evolution of View Park: Making Sense of Gentrification” featured great audience participation, some solid questions and an excellent presentation.
As mentioned in previous articles on this series; the gentrification topic is very complex and one that can be quite emotional in discussing, particularly from the brave souls in attendance who offered compelling anecdotal commentary. These types of events are eye-openers as the commentary offered by the audience oftentimes transforms into a venting session which is necessary to put the topic front and center. However, it can be precarious as the venting can go on and on…….leaving very little room for solutions based strategies to be communicated.
“This series has been so successful Karen should take it on the road” Robert Lee Johnson, Community Author
The event started at 2pm and once again the venue was packed to the brim. As predicted due to the primary area of discussion; View Park, the majority of those in attendance were African-American.
Crack epidemic in the 80’s
The civil rights movement of the 1960’s as well as the dismantling of racial covenants which previously kept African-Americans from moving into certain communities was critical as there was an increase in the movement towards achieving middle class status through home ownership.
Families grew at an impressive clip. What gets lost in the whole gentrification discussion, particularly trying to answer the question of if certain neighborhoods or property was hard to achieve why did some of those same families leave and flee to the suburbs and other areas? For those who cherish Ronald Reagan as an icon of growth while perpetuating the “American dream,” those from the African-American communities have a different perspective. It is well documented funds needed to fight the Nicaraguan war as well as other conflicts in Central and South America came from the purchase of the readily supply of cocaine. The product found haven in urban centers across America. The result was turf battles, killings and other negative consequences which dismantled neighborhoods that were once beacons of progress and hope. As those areas decayed, it became ripe for reinvestment to replace current occupants.
Legacy and affordability
A key theme or issue which many were seen nodding their heads in agreement was the notion that offspring of those who purchased property in the 60’s, 70’s, 80’s and beyond have great difficulty in being able to purchase their own home, today! While that is a statement many seem to affirm, it raises many questions. Did those parents who originally purchased home not do an adequate job in helping their offspring achieve financial literacy? Due to their successes, did they seem to project a road that their offspring would not have to work or sacrifice like they did? Why do they assume their offspring cannot qualify for financing, while admitting their incomes are perhaps higher based on the age they first purchased? It is more complex then assessing those who grew up in the area cannot afford the very area they grew up in.
The interest in the symposium topic was obvious based on packed crowds at each event. There was a strong sentiment of how homeownership was achieved and how it was critical for them to create a legacy for their heirs. More important was the need for African-Americans to maintain those neighborhoods.
United States history is ripe with laws, regulations, discrimination and other tactics to deprive groups such as African-Americans from owning property or relegating them to specific communities. Some in attendance were quick to point out their pleas to keep neighborhoods in the hand of African-American should not be construed as defining them as racist. Technically that would be impossible as racism is using race to oppress other ethnic groups. African-Americans are not creating any laws or systemic maneuvers to keep any out.
As mentioned due to the venting there was more assessment of the problem versus solution. However, that is to be expected as what Karen Mack organized was a starting point to discuss the issue and that is crucial for stakeholders to speak to their issues.
One important theme offered by those presenting possible solutions was the need to become organized and take a more active role in legitimate organizations.
Due to time the event had to conclude but many in attendance committed to taking this discussion offline and continue to address issues to combat the negative reality of gentrification.
Readers are encouraged to educate themselves on this topic. Karen Mack may or may not agree to a road show, in the meantime those interested must stay engaged in community platforms such as the one which brought folk together for this series.
Creating some relief for those obtaining a new mortgage, rates slid down 10 basis points in week over week reporting. This morning job numbers also posted impressive gains, despite Donald Trump breaking a long-standing policy of intimating the news prior to the official release with one of his early morning tweets. The issue is the Bureau of Labor Statistics is to be the first voice in officially releasing the numbers, which normally is around 8:30AM . Period!
In Trump fashion while he did not specifically break protocol, his mere mention was enough to cause consternation for those who treasure integrity from our institutions.
These two metrics and other positive signs bode well for those in political control and could be enough to keep them in the driver’s seat. The unknown is will they be enough to fend off the impending blue wave from the November election that could result in Democrats gaining control of one or both seats of Congress?
Those in control insist the majority of voters are only concerned about kitchen-table issues and pay little attention to the other dilemmas Trump and the ruling party are attempting to deal with. They are banking on as long as impressive economic numbers are achieved, any other issues are secondary and will keep them in control.
Of course, Congressperson Maxine Waters (D-California) who has been a thorn in the side of Trump and his supporters sent out a warning while appearing on a national news program earlier this year in March.
“for if some reason, Robert Mueller does not get him, Stormy will.”