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The First American Corporation
Closing the Minority Homeownership Gap:
A National Policy Solution
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The Situation
A strong housing market in recent years has been a tremendous financial benefit to many Americans, but not all. Americans are enjoying $3 trillion dollars of greater housing wealth than they did in 2000 due to rising home values1, and home equity now accounts for more than half (51 percent) of the total net wealth of the typical home owning family.
Homeownership is the primary source of a household's net worth and the first step toward accumulating wealth Minority and low- to moderate-income families have begun to participate in this wealth accumulation. During the last 10 years, there has been a rapid increase in homeownership rates among minority families. Nearly one-third of the growth in total homeownership during the past decade has been driven by this population. In addition, it is estimated that minority families will account for more than 60 percent of all first-time homebuyers over the next 10 years. These numbers are encouraging, but there is still much work to be done by public and private sector organizations to support and continue this growth.
The Challenge
At this time, there is a disparity in homeownership between the minority communities (40 percent) and the non-minority community (74 percent). Closing this minority homeownership gap makes sense in light of the changing demographics and economics of these strategic markets, yet numerous barriers persist, hindering the ability of minorities to fulfill the American dream of homeownership as readily as the general population does. These barriers include:
- A lack of understanding of the home buying process
- A lack of available capital for down payments and closing costs
- A lack of traditional credit histories, leading to denial of prime mortgage credit
Consumer advocacy groups, government institutions and other leaders in these communities are looking to work in partnership with private corporations and one another to find collaborative solutions to these homeownership challenges. At the local and national legislative arenas, homeownership has become a number one policy priority. The First American Corporation, the nation's leading provider of housing-related data and services, has taken a serious look at these challenges and formulated an institutional solution to the impediments to homeownership listed above.
The Solution: First American's National Policy Solution
The First American Corporation is unveiling a National Policy Solution to help unlock the door of homeownership for minorities and low to moderate-income families. It is centered on a nationwide commitment to help eliminate the most significant barriers to minority homeownership.
The cornerstone of the policy are the five key deliverables of First American's "Opening Doors" program:
- Bundled title and settlement services in a single, guaranteed package, discounted by as much as 25 % for qualifying families; (*see Chart 1)
- Non-traditional and alternative credit scoring products that utilize non-FICO credit models and take into account the buying patterns of minority groups;
- Launch of the MSN Latino Personal Finance Center, a First American-sponsored Web portal that serves as an educational guide and empowerment tool for minority communities.
- Providing technology applications to our real estate broker and agent partners, equipping them to better serve minority communities.
- Strategic investments in community organizations that champion local economic development and homeownership assistance.
Chart 1 - Price Comparison Matrix
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Retail Pricing |
New Affordable Housing Settlement Package |
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| Title Insurance |
$1,393 |
Included |
| Escrow/Closing |
$740 |
Included |
| Credit Report |
$18 |
Included |
| Flood Certificate |
$18 |
Included |
| Appraisal |
$400 |
Included |
| Home Warranty |
$400 |
Included |
| TOTAL |
$2,969 |
$2,280* |
| * This example is based upon the purchase of a $300,000 home in Alameda County, California in October 2004. Settlement package prices vary by county. |
This solution-based approach will simplify the home purchasing process while reducing the out-of-pocket expense for low- to moderate-income families by an estimated $4 billion over the next five years. Immediate and direct benefits to home buyers under this plan include: certainty and clarity regarding the price of closing costs, simplification of the closing process, material savings in cash required to close, the ability to use their non-traditional credit history to qualify for the best possible mortgage loans, and continued investment in these traditionally underserved communities. First American estimates a potential cost savings of $800 million per year for a projected 1 million minority and low to moderate-income home purchasers annually.
In conclusion, full adoption of First American's National Policy Solution would result in the production of more home buying opportunities, in turn leading to greater creation of equity, wealth accumulation, and enhanced financial stability in the nation's under-served communities. In short, industry-wide adoption of The First American National Policy Solution is in the best interest of both individual consumers and the U.S. housing industry as a whole.
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Affordable Homeownership Settlement Bundle