FHFA’s Sandra Thompson to Address Racial Homeownership Gap

First Black Woman Sandra L. Thompson to Lead FHFA.  Pledges to Address Racial Homeownership Gap

Earlier this year, President Biden designated Sandra L. Thompson the Acting Director of FHFA.  Thompson brings over four decades of government experience in financial regulation, risk management, and consumer protection.  Her experiences range from housing and regulatory policy to financial research to risk management and consumer outreach activities. She’s held leadership positions at the Division of Housing Mission and Goals (DHMG) and the Federal Deposit Insurance Corporation (FDIC). In December, President Joe Biden announced his intent to nominate Sandra L. Thompson to serve as the Director of the Federal Housing Finance Agency (FHFA) making her the first black woman to lead the FHFA.

The new appointment is significant given the country’s current housing crisis—in particular a shortage of affordable and entry level starter homes.  Newly-constructed homes below 1,400 square feet—typically considered “entry-level” homes for first-time homebuyers—represent less than 10 percent of all new builds (Bernstein et. Al 2021). According to the National Association of Homebuilders, starter home supply is short by 1MM homes. In 2020 only 65,000 starter homes were built (compared to 418k average in the 1970’s), yet 2.38MM first-time buyers entered the market (Khater 2021). Homeownership has become increasingly out of reach for working families, people of color, and Millennial households.

The median home price in November 2021 was $353,900, up 13.9 percent year-over-year marking 115 consecutive months of price increases (Associated Press 2021).  In some states, home prices have increased more by than 30 percent (CoreLogic 2021). First time homebuyers—especially people of color—are particularly hard hit by high prices; they often don’t have the savings for the down payment more expensive homes require or the finances to cover closing costs and reserves.

The current housing crisis has been building for decades. Housing stock across all price bands has not kept pace with demand.   But market conditions spurred by the pandemic have accelerated the growing disparity and decline in homeownership.  The racial homeownership gap is wider than it was in 1960 when housing discrimination and segregation were legal, according to the Urban Institute.   “There is a widespread lack of affordable housing and access to credit, especially in communities of color,” says Thompson. “It is FHFA’s duty through our regulated entities to ensure that all Americans have equal access to safe, decent, and affordable housing.”  Additional challenges facing buyers of color include a need for better homebuyer and ownership education and an overhaul in the way homes are appraised to determine values.  It’s also critical that banks reevaluate mortgage eligibility and creditworthiness by considering alternative forms of credit like timely rental payments.  Fannie Mae estimates that about 17% of applicants over the past three years would have qualified for mortgages had their rent histories been considered (Layne 2021).

Thompson has already directed federally backed mortgage companies Fannie Mae and Freddie Mac to examine barriers to homeownership for Black and minority communities.  Starting September 2021 Fannie Mae announced it is aiming to narrow the racial wealth gap and will consider the most recent 12-month rent payment histories when lenders run its automated creditworthiness check system.

Works Cited:

Associated Press. “Existing Home Sales, Median Price Edged up in November.” WBBJ TV, ABC, 22 Dec. 2021, https://www.wbbjtv.com/2021/12/22/existing-home-sales-median-price-edged-up-in-november.

Bernstein, Jared, et al. “Alleviating Supply Constraints in the Housing Market.” The White House, The United States Government, 1 Sept. 2021, https://www.whitehouse.gov/cea/blog/2021/09/01/alleviating-supply-constraints-in-the-housing-market/.

“CoreLogic Reports Annual Home Price Growth of 17.2% – the Highest Level since the Late-1970s.” CoreLogic®, CoreLogic, 2 Aug. 2021, https://www.corelogic.com/press-releases/corelogic-reports-annual-home-price-growth-of-17-2-the-highest-level-since-the-late-1970s/.

Khater, Sam. “One of the Most Important Challenges Our Industry Will Face: The Significant Shortage of Starter Homes.” Freddie Mac Research and Perspectives. Freddie Mac, April 15, 2021. http://www.freddiemac.com/perspectives/sam_khater/20210415_single_family_shortage.page.

Layne, Rachel. “Mortgage Giant Fannie Mae to Consider on-Time Rent Payments in Home-Loan Approvals.” CBS News, CBS Interactive, 13 Sept. 2021, https://www.cbsnews.com/news/fannie-mae-rental-payment-history-credit-score-mortgage-lending/.

Reilly, Caitlin. “FHFA Nominee Pledges to Address Racial Homeownership Gap.” Roll Call, CQ Roll Call, 13 Jan. 2022, https://www.rollcall.com/2022/01/13/fhfa-nominee-pledges-to-address-racial-homeownership-gap/.