Dear Readers,
As the housing market comes off a record-breaking year, it’s important
to remember that not everyone has a seat at the table. Lenders deny
mortgages for Black applicants at an 80 percent higher rate than for
white applicants, according to a Zillow report, and the No. 1 reason that
Black Americans are denied mortgages is the lack of a credit history.
Around 15 percent of Black and Latinx Americans are considered
“credit invisible,” meaning they have no credit score, according to the
Zillow report. That hinders their ability to obtain financing. Considering
that nearly three out of four homebuyers get a loan, the traditional ways
of building a credit history have created a homeownership race gap.
“The Biden Plan to Build Back Better by Advancing Racial Equity
Across the American Economy” proposes the creation of a public credit
reporting agency operated within the Consumer Financial Protection
Bureau. Instead of relying on private companies to produce credit
reports that the plan calls “rife with problems,” the public agency
would accept rental history and utility bills to establish credit and
would ensure “the algorithms used for credit scoring don’t have a
discriminatory impact.” To help establish the new agency, Biden would
ask federal housing programs to accept its scores for their financial
assessments and underwriting.
The plan is, not unexpectedly, getting pushback. It might not be the best
answer, but clearly, there is a problem with the current credit scoring
system. Opening up homeownership opportunities to the 26 million
Americans who do not have a typical credit record is the right thing to
do and can only strengthen the entire industry.
Share your thoughts,
Erica Peterson
Editor, The Title Report