Bank of America takes on housing affordability challenge

The home ownership rate in the United States fell to 64.1 percent in the second quarter of 2019, according to a new report from the U.S. Census Bureau.

That’s the lowest rate since the middle of 2017, and reflects rising home prices as well as a tight supply of starter homes, Bloomberg reported.

To help overcome the financial obstacles, Bank of America recently unveiled a $5 billion program to boost home ownership. The program, for low-to-moderate income homebuyers and communities across the United States, offers down payment and closing cost assistancea nd is expected to help more than 20,000 individuals and families, the Charlotte, North Carolina-based bank said in a news release.

Bank of America (NYSE: BAC), the largest bank in the Tampa-St. Pete area based on deposit market share, isn’t alone in addressing the housing affordability crisis.

Bill Zielke, area lending manager, Bank of America

Wells Fargo & Co. (NYSE: WFC) and NeighborWorks America invested $442 million for 67 NeighborhoodLift programs, including in Tampa-St. Pete, providing homebuyer education and down payment assistance. Chase Home Lending, part of JPMorgan Chase & Co. (NSYE: C), launched a program in March 2018 providing $3,000 in grants and incentives to cover closing costs and down payments for families buying homes in low-to-moderate income communities.

The programs can play a role in boosting economic equity.

“A homeowner has a median net worth 44 times greater than a renter,” said Bill Zielke, a Tampa-based area lending manager for Bank of America. He cited the Federal Reserve’s 2016 Survey of Consumer Finances. “Everyone talks about how a home is your biggest investment. That stat shows how critical it is for building wealth for your family.”

Rising home prices have made it much tougher to buy, however. The median sales price of a home in the Tampa-St. Pete metro area in June was $250,000, up 2 percent from a year earlier, according to Florida Realtors.

The Bank of America program has several components:

• Down payment grants. The bank will give eligible borrows up to $10,000 to be used for a down payment.

• “America’s Home Grant program” offers a lender credit of up to $7,500 that can be used for non-recurring closing costs such as title insurance or recording fees, or to permanently buy down the interest rates. The funds do not require repayment.

• A fixed-rate loan for low-to-moderate-income borrowers. Ninety percent of those loans are for first-time homebuyers, the bank said.

The bank also helps homebuyers tap into down payment and cost-savings programs offered by state and local agencies, nonprofits and employers.

Shortly after the closing cost grant program launched, Zielke said, the bank worked with a client who got down payment assistance from the City of Tampa.

“The client was able to get over $10,000 from the City to cover their down payment. They got the $7,500 grant from us to cover their closing costs. Their total cash to close on the whole transaction was $2,020,” Zielke said.

That buyer’s mortgage payment, including taxes and insurance, was more than $400 cheaper than the rent they were paying.

“That’s making a difference in someone’s life, someone who has been working, trying to build their career and spending their money on rent, and we’re able to get them into a house,” Zielke said.

Census statistics show a disparity in home ownership rates by race and ethnicity. Second quarter 2019 homeownership rates were highest for non-Hispanic white householders, at 73.1 percent, compared to 40.6 percent for Black householders.

Half of Bank of America’s loans go to low-to-moderate income and multicultural clients, Zielke said.

“That’s a great opportunity for us to help them with their home ownership goals and putting them on the path of having net worth 44 times greater than that of a renter,” he said.