Ariel Abaya put his three kids through college by driving his cab in New York for the last 20 years. But despite that accomplishment, he's afraid he'll never be able to get a mortgage.
He's self-employed, which means no steady income - something banks and mortgage companies usually insist upon.
"I got the paperwork, but always think I will spend time on it. Then nothing will happen," he says. "They'll reject me."
In the past two weeks, the nation's policymakers and private lenders have signaled that is a perception they're determined to overcome. And they backed the talk up with cash, lots of it.
One bank, in an unprecedented move, committed more than $35 billion, along with a package of mortgages with low and no down payments. The AFL-CIO pledged an additional $750 million of its pension funds toward investing in affordable housing. And the Department of Housing and Urban Development (HUD) is planning for $235 million more in programs to counsel first-time homebuyers and help them with down payments.
The reason: Mr. Abaya and people like him represent a vital untapped market that could keep America's housing boom rolling through this recession and into the next decade.
"If housing had declined as it usually does in a recession, the decline in GDP would have been five times worse, and 350,000 more Americans would have lost their jobs," says Franklin Raines, chairman and chief executive officer of Fannie Mae, the nation's largest source of financing for home mortgages.
Getting people into their first home can also foster community development in targeted urban areas and shrink the persistent wealth gap between white and minority Americans. "Homeownership ... is the first step in wealth creation and moving into the middle class for low-income and immigrant families. It's absolutely critical," says Kathryn Wylde, president of the New York City Partnership, which fosters public-private development ventures.
Thus the push to help more Americans buy into the dream. Overall, homeownership is at 68 percent, near a record level. But the rate for minorities is significantly lower: 49.5 percent, according to HUD. There are a variety of reasons - from lower incomes to the residue of distrust left by decades of overt discrimination.
Indeed, a recent study of black and white neighborhoods with comparable incomes in New York City found that denial rates for blacks were double those for whites at conventional banks. Even blacks comfortably in the middle class - those with incomes above $60,000 - were more likely to be rejected for a home loan than a white family making under $40,000.
That's created a flourishing market for subprime lenders - those that charge higher upfront costs and higher interest rates to hedge against increased risks - in predominantly black neighborhoods. The study, which was done by the office of Sen. Charles Schumer (D) of New York, found that 51 percent of the loans in predominantly black neighborhoods were from subprime lenders, compared with only 13 percent in the white neighborhoods.
But when they looked for the cause of the disparity, Senator Schumer said it wasn't because banks shy away from loaning in minority neighborhoods. In fact, the opposite tends to be true, because the federal government has set up incentives to encourage loans.
"The problem is, times have changed, but reputations haven't," he says. "You still have lots of affluent African-Americans who don't want to walk into a bank."
To overcome such deeply ingrained barriers, JPMorgan Chase and Fannie Mae recently pledged $35 billion over five years. They're working with community organizations to provide education and counseling about mortgages and homeownership. They've also come up with options for people with impaired credit.
"Instead of saying, 'Here's what we have,' we want to say, 'How can we help?' " says Daniel Mudd, vice chairman and chief operating officer of Fannie Mae.
Housing experts across the board applaud the moves. But they also warn that making mortgages available is only a part of the equation. Housing costs, particularly in urban areas like New York, Chicago, and Los Angeles, were driven so high in the 1990s that even with a no-down-payment, low-interest loan, homeownership is still out of reach for most low-income people.
"Across the board, the cost of building 'homeownership housing' exceeds what low-income people can pay in the urban setting," says Ms. Wylde. "I haven't seen any exceptions to that."
At ACORN, a grass-roots membership organization that works with low- and moderate-income people, the problem is evident. For the past five years, they've been working to help people buy into the system. Although last year they counseled more than 600 families who wanted to buy a home, only 100 of those have been able to qualify for a mortgage.
"We are probably the most aggressive organization around in terms of advocating for people to get loans," says Ismene Speliotis, director of ACORN Housing. "That shows just how difficult it is."
ACORN will be working with JPMorgan Chase to help more people access mortgages. And Abaya says he plans to apply. It's a dream he's had since he first came here from the Philippines. "I've always wanted to own my own place," he says. "I just never thought it was possible."