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Citi pledges to serve more minority homebuyers

The lender is expanding access to HomeRun and Lender Paid Assistance mortgage programs, two loan products that can be an important tool for minority borrowers in low-income and low-income areas.

Citigroup Inc. acknowledges that the rate of mortgage applications and origins for Black and LatinX customers has fallen during the pandemic and is investing in digital mortgage features to better reach all communities while expanding mortgage programs that help keep down payments and make closing costs more manageable for borrowers.

Citi wants more homebuyers to take advantage of the HomeRun mortgage program, which allows borrowers to make down payments of as little as 3 percent without taking out mortgage insurance, and the Lender Paid Assistance program, which offers up to $ 5,000 in closing expense assistance.

The announcement comes as Citi shareholders, who are attending the company’s annual meeting today, are asked to approve a “racial equity review” that will analyze the bank’s impact on color communities. The audit is supported by the CtW Investment Group, which works with pension funds sponsored by unions that represent nearly 5 million members.

The investment group has asked shareholders of seven other “systemically important financial institutions” – Bank of America, Black Rock, Goldman Sachs, JP Morgan Chase, Morgan Stanley, State Street and Wells Fargo – to approve similar reviews.

However, Citigroup’s board of directors recommends that shareholders decline the review as the company “believes it is already addressing its intent”. “While we disagree with the overall approach of this proposal, we fully agree with the stated goal of eliminating racial inequality in the financial sector,” advised the company to shareholders.

Last year, Citi published a 104-page report titled “Bridging the Gaps on Racial Inequality” and announced a $ 1 billion “Racial Equality Initiative” to address the issues identified in the report.

Prior to today’s board meeting, the company reviewed the early results of the Racial Justice Initiative, which aims to improve access to banking and credit in color communities, increase investment in black-owned companies, and increase home ownership among blacks raise Americans and promote anti-racist practices in the financial services industry.

Jane Fraser

“We know that many are right to urge banks and other large corporations to really deliver on their commitments,” said Jane Fraser, CEO of Citi, in a statement. “Today we’re sharing what we’ve done so far, to show how much Citi is committed to real change and to be clear and transparent about how far we need to go. We are determined to do all we can to close the racial wealth gap in our communities and continue to work to become an anti-racist institution. “

On home ownership, Citi said it is in the “final stages” of allocating US $ 200 million to maintain affordable housing and housing for the workforce and is continuing the plans previously announced, the community lending team and network expand correspondent lenders to provide better access to minority mortgage lending borrowers in low-income and low-income areas.

Citi said it will put more resources and capital into two loan products that can be an important tool for many of these borrowers:

  • The HomeRun Mortgage Program offers flexible credit guidelines for borrowers who make down payments as low as 3 percent. Unlike most mortgages, for borrowers who make down payments of less than 20 percent, there is no need to purchase mortgage insurance. The HomeRun mortgage is available for both home purchases and for refinancing interest rates and terms where borrowers do not pay out equity.
  • The Lender Paid Assistance program provides a lender loan of up to $ 5,000 that is used to offset the closing costs of purchasing a primary residence. Anyone whose income is less than 80 percent of the median can qualify, and the program is also available to households in low- to middle-income census areas.

While that’s not part of Citi’s announcement, the company is looking to hire a new head of retail mortgage sales. In addition to the “strategic alignment and monitoring of a combined staff of over 800 employees”, the specific responsibilities of the position include “the development and implementation of important strategic initiatives for [Community Reinvestment Act] and fair lending to serve better [low to moderate income] and minority customers and communities, and improving regulatory performance and cost structures related to CRA and fair credit performance. “

According to the Center for Responsible Lending, there was a “modest increase” in the proportion of home loans granted to black and Latin American borrowers in 2019. Although 13.4 percent of Americans are black, they received 7.0 percent of home loans. Latinos make up 18.3 percent of the U.S. population, but received 9.2 percent of home purchase loans in 2019.

Nikitra Bailey

“By failing to create cost-effective home ownership opportunities for color borrowers, we are denying millions of Americans the opportunity to accumulate wealth, stifle economic growth, and widen the racial and prosperous gap,” said Nikitra Bailey, executive vice of the Center for Responsible Lending president , in a statement last year (2020 data to be released in June).

Bailey said many of the data points that lenders are required to submit to regulators under the Home Mortgage Disclosure Act (HMDA) requirements are not made public, making it harder to “understand the reasons for differences in mortgage lending.” She said the Consumer Financial Protection Bureau should share credit score data and other fields it is now collecting from lenders to the public.

A recent analysis by the Urban Institute found that low credit scores combined with high debt-to-income and credit-worth ratios “reduce the likelihood of mortgage approval and increase the cost of borrowing for potential homebuyers.”

These characteristics are related to income and wealth. “This means households with fewer financial resources are likely to struggle to access home equity when it is needed most and pay a higher price when buying a home. Access to credit is an area in which public order must adapt so as not to exacerbate the precarious situation of many black households. “

Email Matt Carter

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