Bank of America’s No Down Payment Mortgage Program, Explained
Bank of America is testing a new program that grants mortgages with no down payment for some people of color. Here’s how it works.
Aug. 31 2022, Published 3:53 p.m. ET
On Aug. 30, Bank of America Corp. (BOFA) announced a no down payment mortgage program that targets first-time home buyers and people of color in certain cities.
Dubbed the Community Affordable Loan Solution, Bank of America’s new mortgage assistance program could open the doors to homeownership for more people. While this trial isn't a panacea, it's a step forward toward closing gaps in mortgage access and equity.
Bank of America launches Community Affordable Loan Solution.
Bank of America CEO Brian Moynihan
In a press release, Bank of America divulged its “new zero down payment, zero closing cost mortgage solution for first-time homebuyers, which will be available in designated markets, including certain Black/African American and/or Hispanic-Latino neighborhoods in Charlotte, Dallas, Detroit, Los Angeles, and Miami.”
The Community Affordable Loan Solution could help make mortgage loans more affordable for individuals and families in the specified demographics.
The no down payment mortgage option from Bank of America is a special purpose credit program.
Bank of America’s new no down payment loan option falls under the category of a special purpose credit program. This type of program is specially designed to meet the credit needs of groups who have been discriminated against in the lending space.
Eligibility is based on income and home location. “Prospective buyers must complete a homebuyer certification course provided by select Bank of America and HUD-approved housing counseling partners prior to application,” the press release states.
Bank of America already has a $15 billion Community Homeownership Commitment to help 60,000 hopeful homeowners make affordable home purchases by 2025. The bank also works with the Neighborhood Assistance Corporation of America (NACA) with another $15 billion program providing mortgage assistance to low-to-moderate income individuals.
Bank of America’s no down payment mortgage trial could fill gaps in equity.
Racist lending practices have left massive gaps in homeownership between demographics in the U.S.
Nearly half a century after U.S. lawmakers passed the Equal Credit Opportunity Act, white Americans are 28.7 percentage points more likely to own a home than Black Americans and 21 percentage points more likely than Hispanic Americans.
Even today, redlining persists. In July, Trident Mortgage Co. settled with the U.S. Department of Justice and Consumer Financial Protection Bureau for redlining against Black and Latino buyers in Delaware, Pennsylvania, and New Jersey.
Bank of America head of neighborhood and community AJ Barkley said about the company’s program, “Our Community Affordable Loan Solution will help make the dream of sustained homeownership attainable for more Black and Hispanic families, and it is part of our broader commitment to the communities that we serve."
While there's optimism, the reality is much more nuanced. Lending bias is rampant across the industry, baked not just into the people facilitating loans at legacy banks, but also the algorithms underscoring fintech firms across the country. While algorithms remove human interactions that can cause bias, humans make these algorithms, suggesting covert and overt bias still finds its way into the cracks.
The lending space requires long-term, widespread, and intentional anti-racist measures to make up for a foundation of discrimination. Bank of Americas no down payment mortgage program makes a dent.