Two new Bank of America lending programs seek to promote homeownership among minority borrowers as well as incentivize economic development in disadvantaged communities.
One is a pilot program that would offer mortgages to Black and Hispanic Americans using rent, utility and auto-insurance payment histories instead of traditional credit scores, BofA said in a news release Tuesday. The other is a down-payment relief program for women- and minority-owned small businesses that buy commercial real estate in federal opportunity zones.
Under the Community Affordable Loan Solution program, the structure of home loans for thin-file borrowers would be based on a home's location and an applicant's income. Potential homebuyers must complete U.S. Department of Housing and Urban Development certification and counseling to qualify but do not have to obtain mortgage insurance.
BofA would make those mortgages available this year in Dallas, Detroit, Charlotte, North Carolina, Los Angeles and Miami with plans to expand in 2023, the release said. The plan builds on the bank's $30 billion of affordable lending initiatives aimed at low- to moderate-income homebuyers.
Homeownership can help people "build wealth over time," AJ Barkley, BofA's head of neighborhood and community lending, said in the release. Barkley said the bank's new loan program will "make the dream of sustained homeownership attainable for more Black and Hispanic families."
The mortgage program is being rolled out after many banks reported lower mortgage income in second-quarter earnings and amid uncertainty in real estate markets as the Federal Reserve continues raising interest rates.
In case of economic volatility, the bank is planning to provide up to $15,000 in down-payment grants for homebuyers to use as home equity to incentivize against foreclosures, according to a Bloomberg
BofA's other program will provide grants to small businesses owned by women and minorities for purchasing commercial real estate in designated opportunity zones, according to the release.
The bank has pledged to pay up to 50% of a down payment, capped at $25,000, for women- or minority-owned businesses that make a minimum 5% payment on loans to purchase the property. Businesses must be located in Atlanta, Chicago, Charlotte, Dallas and Los Angeles.
The offering coincides with BofA's launch last week of a credit line for small businesses ranging from $1,000 to $50,000.
The Consumer Financial Protection Bureau's recent offensive against redlining by nonbank mortgage originators is increasingly relying on internal communications to make charges stick.
The lending programs are an extension of efforts from BofA and the wider banking sector to respond to recent social accountability initiatives sparked in part by incidents including accusations that Wells Fargo practiced discrimination in rejecting mortgage applications from Black Americans and Berkshire Hathaway-owned Trident Mortgage being fined for
BofA said it has also developed programs to assist new homebuyers in finding property and qualifying for mortgages and has developed online financial education courses.
