It may need some renovations - new windows and hardwood floors. But, for Holly Madison, the brick row house in northeast Washington is now home. Last Friday, Ms. Madison, an accounting manager, took out a federally backed mortgage to fulfill the dream of having a home of her own to raise her young son, Taylor.
"It feels really good," says Ms. Madison, a black, single parent.
It's a feeling shared by more and more minorities. Because of income disparity and lending discrimination, the rate of homeownership among African-Americans and Hispanics still lags behind whites. But minorities are now on a home-buying binge. In fact, first-time-in minority buyers are a major force in the current nationwide housing boom.
"We are seeing a social shift - the most promising social shift of our generation," says Marc Smith, president of the Mortgage Bankers Association in Washington.
Last year, home sales to minorities rose by 28 percent, compared with a decrease of 1.3
percent for whites, according to an annual survey by the Chicago Title and Trust Co.
As home sales have swelled, mortgage lending to minorities increased as well. Between 1993 and 1996, home loans to blacks rose by 52.5 percent and to Hispanics by 55.6 percent compared with 14 percent for whites and 15.3 percent for Asians.
Lending to minorities by Fannie Mae, the nation's largest source of home-mortgage funds, rose from 13 percent to 17 percent between 1993 and 1997. Last year, this amounted to almost $12 billion.
At the same time, some of the country's largest financial institutions are boosting their home lending to minorities:
This month, Citigroup, the new combination of Citibank and the Travelers Group, pledged $115 billion to lend and invest in low- and moderate-income communities over 10 years, including $20 billion in new mortgages.In March, Countrywide Home Loans, the nation's largest independent mortgage firm, committed $50 billion over five years in low-income mortgages. Earlier this month, Fannie Mae said it would add another $2 billion to its low-income lending.
But minorities, who have long been left out of the home-buying loop, lag behind whites in ownership. Despite the home-buying surge last year, 45 percent of minorities own their own homes, compared with 65 percent of whites. "These are communities that have been under-banked and under-loaned," says Mr. Smith.
But the trend has also been helped by the surging economy and low interest rates, which make monthly payments more reasonable. The mortgage-lending community has also boosted its outreach programs.
For example, Fannie Mae now advertises on Black Entertainment Television. Five million consumers have called a toll-free Fannie Mae number. "Let me tell you, a high percentage of those calls were African-American or Hispanic," says Barry Zigas, executive director of Fannie Mae's affordable-housing division.
As the Fannie Mae experience shows, the potential is not lost on the business community. After announcing its $50 billion program in March, Countrywide was flooded with calls. "The response has been overwhelming," says D. Steve Boland, director of fair lending for the Calabasas, Calif., firm. It plans to open up 15 new branches, including some in rural areas. "We think rural areas are untapped as well," he says.
Just an image-booster?
Last year, Citibank, which is merging with the Travelers Group, doubled its lending to minorities, mainly for mortgages. However, to meet its goal of lending or investing $115 billion over the next 10 years, the bank will need to keep expanding its low- and moderate-income business at a rapid pace. "We're meeting with our nonprofit community partners to find ways to get this done," says Pamela Flaherty, a senior vice president.
Despite all these plans, some minority groups are skeptical.
Shanna Smith of the Washington-based National Fair Housing Alliance, says financial institutions over the past 10 to 15 years have been slow to meet minorities' needs. "They have a lot to make up for," she says.
She observes Citibank needs to make these investments to improve its image to get approval for its merger. "It's a good way to get community groups not to oppose the merger," she observes.
Citibank confirms it didn't put together the plan until after it announced the merger.
Racism still exists
She says many lenders steer minorities, even upper-income earners, to Federal Housing Administration (FHA) loans that end up costing more. "They sometimes make decisions on the phone on the basis of your inflection. And they ask Hispanics for proof of citizenship."
Milo Pinckey, an African-American who's president of Hinsdale Medical Management in Brooklyn, attests to this racial bias. The son of a physician, he had financial difficulties in 1987 when he got overextended in real estate. He didn't declare bankruptcy but became labeled a "slow payer."
Ever since, Mr. Pinckey hasn't been able to get a credit card. He applied for a mortgage last February and was given an interest rate of 8.25 percent at a time when conventional mortgages were 6 percent. "My experience with lending to minorities is that racism is alive and well," he says.
But not everyone views FHA mortgages as racist devices.
Anthony Lewis of Crestar Mortgage Co. in Greenbelt, Md. says many minorities feel more comfortable with FHA loans. "There's less upfront cash, and many times the biggest problem is down-payment," he says.
The low down-payment also helped Kimberly Patrick, who had been living with her mother, to save up and buy a new row house in Washington. "It's something I've always dreamed about -owning where I lived."
And in the current climate, more are reaching this dream.
Mr. Smith, the Mortgage Bankers Association president, recounts a visit to a Harlem classroom. He asked how many students' parents owned homes. Only one raised their hand. Then, he asked, "How many of you want to own your own home?" They all raised their hands.