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Citi is expanding a program to encourage homeownership in diverse communities, as part of a new set of initiatives to broaden access to its lending products.
The program, called home run, aims to help remove key barriers to homeownership, including cost and affordability. The program, which offers down payments as low as 3% with no mortgage insurance requirement, is paired with a lender-paid assistance program that helps offset closing costs.
Separately, Citi is launching two new pilot projects aimed at giving people with limited or no credit information more access to credit, as well as providing access to capital for small business owners in Los Angeles, by focus on businesses run by women, minorities and veterans.
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These measures are part of a legacy focused on financial inclusion and racial equity, according to Lisa Frison, who is head of financial inclusion and racial equity for US Personal Banking at Citi.
“Across all initiatives, creating access to mainstream finance is fundamental,” Frison said.
“But helping communities build assets is transformational, and home ownership is part of that,” she said.
Lenders seek to ‘better serve’ diverse communities
“Our affordable community loan solution will help make the dream of sustainable homeownership accessible to more Black and Hispanic families, and it’s part of our broader commitment to the communities we serve,” AJ Barkley , Head of Neighborhood and Community Loans at Bank of America, said in a press release.
The research found that black home ownership has declined. If black homeownership rates were the same today as they were in 2000, there would be 770,000 more black homeownersaccording to the Urban Institute.
Even as the homeownership rate in the United States reached record highs in 2020, Black home ownership was even lower ten years ago, according to the National Association of Realtors. Black Americans continue to face significant barriers that prevent them from buying homes, including high levels of student debt, according to research.
As mortgage lending activity has slowed considerably this year, this could give financial institutions an opportunity to reach new markets.
“There may be an opportunity now for mortgages in some of these institutions to go out and look to better serve some of these communities,” said Keith Gumbinger, vice president of HSH, a market research firm.
Citi’s HomeRun community affordable loan program is eligible for low-to-moderate income borrowers based on census data. Typically, that includes borrowers who have a family income below the median income, according to Frison.
With the expansion of the program, Citi expands both income and geographic eligibility.
The program currently targets borrowers with a median family income below 80%, a figure that will drop to less than 120% of the median family income according to census data.
“It’s really going to allow a lot more people to enjoy it,” Frison said.
Citi also plans to expand the geographic footprint of the program. HomeRun is currently available in cities including San Francisco, Los Angeles, New York, Miami, Washington, DC, and Chicago.
A “for sale” sign hangs in front of a home on June 21, 2022 in Miami, Florida. Existing home sales fell 3.4% to a seasonally adjusted annualized rate of 5.41 million units, according to the National Association of Realtors. Sales were 8.6% lower than May 2021. As existing home sales declined, the median price of a home sold in May was $407,600, an increase of 14.8% from to May 2021.
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It will be available in other markets, including Atlanta, Austin, Denver, Dallas, Houston, Philadelphia, and Cambridge, Massachusetts, with a particular focus on majority minority census tracks within those markets.
No private mortgage insurance is required, which can allow homebuyers to use the money they save to lower their monthly mortgages or buy more homes, Frison said.
It is available to both first-time home buyers, as well as those who have already purchased a home or are looking to refinance. It can apply to the purchase of a single-family or two-family home, as well as condos and cooperatives.
Additionally, the Lender Paid Assistance Program offers credit to eligible borrowers to help with closing costs. This amount will increase from $5,000 to $7,500.
To expand access to credit for homeownership, Citi will explore other ways to assess credit readiness, Frison said. If a credit score is not available, she will look at other factors, such as rent and utility payments, to assess an applicant’s ability to repay debts and become a successful homeowner.
In addition, Citi is also hiring a group of Community Loan Officers who will have ties to the community, including Affordable Housing Community Partners and Realtors, specifically various Realtor Associations.
“We’re going to work hard to go deep into communities to make sure this message is heard,” Frison said.
At the same time, Citi is also launching two new pilot projects aimed at making credit cards accessible to populations considered “credit-invisible,” as well as a special-purpose credit program aimed at Los Angeles-based small businesses.
Both initiatives are set to launch in early 2023 and are part of Project REACh, led by the Office of the Comptroller of the Currency, which promotes broader financial inclusion through access to credit and capital.
Citi’s Credit Invisibles program aims to secure and approve credit cards for people who have little or no credit information.
The program will endeavor to identify if other data is available to approve a credit application for applicants who are not approved through the traditional underwriting process.
Brookings Institution Research found that 46% of blacks and 32% of Hispanics are either unbanked or underbanked, compared to 14% of whites.
Without access to traditional lending services, many unbanked or underbanked people turn to higher cost products like payday loans. The average interest rate on a payday loan is 391%, according to 2019 data from the St. Louis Federal Reserve, compared to 17.8% for the average credit card.
“A credit card is one of the most basic necessities from a money management perspective, and being able to provide that option is something we’re interested in,” Frison said.
Citi will also begin providing technical assistance resources and access to capital to Los Angeles-based small business owners early next year, with a particular focus on women, minorities, and veteran business owners. . The goal is to expand this program to other markets in the future.