Fannie Mae Sees Flaws In Black Mortgage Denial Rate Cited By MBA As Denial Rate Is Not A Sufficient Statistic

As conventional lending standards have tightened, F.H.A.-backed loans have become crucial to maintaining credit access in minority communities. But at the same time, Mr. Humphries said, F.H.A.’s dominance among such borrowers hints at a problematic trend: “a different path to financing based on your race and ethnic group.”

And the F.H.A. path can be costly. Although F.H.A.-backed loans offer the initial advantage of less money down, their mortgage insurance premiums are considerably higher than premiums on conventional loans.

Julia Gordon, the director of housing finance and policy at the Center for American Progress, a liberal research group, has concerns about what she calls “the dual housing market,” and says she believes the conventional market ought to be making lower-down-payment loans more widely available. “Like all the other separate-but-equal arrangements,” she said, “this is not good for consumers or the market or for taxpayers. We are seeing creditworthy people who should be able to get loans in the conventional market but can’t.”

Ongoing discussions in Washington about how to wind down Fannie Mae and Freddie Mac should include a commitment to ensure that lenders make credit available equitably, she added.

Another approach to broadening access to conventional financing is to make it easier for first-time buyers to accumulate a larger down payment. One way that could be done is through reform of the mortgage interest tax deduction, which currently benefits wealthier homeowners, Mr. Humphries said. “If our goal there is to stimulate homeownership,” he pointed out, “it would be more efficient to restructure that as a tax credit for first-time home buyers as opposed to a deduction. That would help with a down payment.”

Jason R. Gold, a senior fellow at the Progressive Policy Institute, a research group, also proposed the creation of “HomeK” accounts, which would give workers the option of using up to half of their contributions to 401(k) retirement savings for a down payment on their first home.