Bank of America introduced a zero down payment, zero closing cost mortgage for black and Hispanic communities in select cities across the United States. An immediate observation would be that this plan is discriminatory. BOA may be able to skirt around allegations of discrimination due to the specific wording found within the press release. This new mortgage, called the “Community Affordable Loan Solution”, will be available to people from select neighborhoods with high black and Hispanic populations… but not specifically to black and Hispanic people.
This program seeks to close the “mortgage gap” between whites, blacks, and Hispanics. For white households, the homeownership rate was 72.1%. That compares with 51.1% for Hispanic households and 43.4% for black households. The black homeownership rate actually decreased in 2020 from what it was back in 2010. The new mortgage is also a way for BOA to shore up any public relations pitfalls due to their own errors in the past as it relates to race and lending.
Critics of the new mortgage from Bank of America obviously have an issue with the racial component. Even if the objective is good, some say that the ends do not justify the means. Then there is the practicality of the loan. If a person cannot afford to put any money down, or closing costs, or the mortgage insurance that typically comes when a person places less than 20% down on a home, then how can they afford the house over a period of time?
Mortgage is just one piece of the homeownership pie. Regular maintenance must also be accounted for. Major repairs like roofing and HVAC require thousands, if not TENS of thousands of dollars in cash at once. Some see this as yet another 2008 mortgage crisis when people were saddled with debt that the banks knew they would not be able to pay back.
Bank of America: Zero-down-payment mortgage for first-time buyers
Bank of America Introduces Community Affordable Loan Solution™ to Expand Homeownership Opportunities in Black/African American and Hispanic-Latino Communities
Bank of America draws mixed reviews for zero-down payment mortgages aimed at boosting Black and Hispanic home ownership – MarketWatch
Bank of America piloting no-money-down mortgages in 5 cities to help Black, Latino buyers
Bank of America Tests No-Down-Payment Mortgages in Black and Hispanic Neighborhoods – The New York Times