Sep 12, 2022 - Real Estate

Bank of America targets Miami with "zero down" mortgage program

Illustration of a key in a lock featuring a keyring with a dollar sign

Illustration: Sarah Grillo/Axios

Banks are trying to make it easier for certain Miami residents to become homeowners.

What's happening: Miami is one of five cities where Bank of America recently announced it's offering "zero down payment" loans for first-time buyers in predominantly Black and Hispanic neighborhoods who meet certain income requirements.

Why it matters: It's part of an effort, along with similar programs from JPMorgan Chase and TD Bank, to close the racial and ethnic homeownership gap, Axios' Emily Peck writes.

  • Back in 2020, BofA and JPMorgan both pledged to spend billions of dollars on racial equity.

Details: These loans technically require a down payment, but the bank is offering grants of as much as $15,000 to cover it. That gives buyers a measure of equity right off the bat.

  • These are different from zero-down loans that, along with questionable underwriting standards, helped make such a mess in the run-up to the Great Recession.
  • BofA also has a separate but similar program, launched in 2019, that offers down payment grants in 69 markets across the country. That grant program has stricter criteria.

How it works: These programs allow lenders to target neighborhoods that are predominantly Black or Hispanic.

  • The banks use what's called a special purpose credit program (SPCP), a policy made possible by the 1974 Equal Credit Opportunity Act, that permits lenders to discriminate to help disadvantaged borrowers.
  • Federal regulators across several agencies have issued guidance on SPCPs over the past year or so, encouraging their use.

Zoom in: A Bank of America spokesperson tells Axios that the program is available in Miami, Miami Beach and Kendall.

  • In Miami, the Black homeownership rate is 46.8%, the Hispanic homeownership rate is 51.1%, and the white homeownership rate is 62.6%, according to an analysis of census data by Stacker.

The big picture: Historically, majority-Black neighborhoods were excluded from mortgages — a practice known as redlining.

  • Black buyers couldn't get the federally backed mortgages that helped so many white Americans buy homes and create generational wealth.
  • The practice was outlawed in 1968, but its legacy haunts the housing market to this day.

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