Governor Cuomo Announces Proposal to Expand Home Ownership in Historically Redlined Communities to Bridge the Racial Wealth Gap as Part of the 2021 State of the State
Package of Reforms to Increase Access to Mortgages Loans for Low- and Moderate-Income Borrowers in Underserved Communities
New York (STL.News) Governor Andrew M. Cuomo today announced a targeted package of reforms aimed at increasing homeownership rates in communities that have been adversely impacted by redlining as part of the 2021 State of the State. The package will enable low- and moderate-income borrowers – particularly households of color – to achieve homeownership and put historically underserved communities on track to close the racial wealth gap. The reforms will increase the number of community-based lenders who offer State of New York Mortgage Agency, or SONYMA, loans in low-income communities, increase down payment assistance for borrowers in underserved areas of the state, and grant SONYMA flexibility to make mortgage modifications in times of crisis so borrowers can remain in their homes.
“We know the racial wealth gap is overwhelmingly a housing wealth gap and New York is taking action to correct systemic injustices that have kept households of color from building wealth,” Governor Cuomo said. “Expanding access to loans and assistance for first-time homebuyers in communities disproportionately impacted by the foreclosure crisis and predatory and illegal redlining practices is an important step toward equalizing homeownership rates and creating a stronger, fairer and more just New York for all.”
SONYMA offers low-interest mortgage loans and programs to help qualified buyers purchase their first home. SONYMA helps remove many of the obstacles first-time homebuyers face by increasing understanding of the overall homebuying process and helping secure funds for a down payment. Experts say equalizing homeownership rates would shrink the racial wealth gap between white and Black families by 31 percent, and the wealth gap between white and Hispanic families by 28 percent.
Expanding Collaboration with Community-Based Lenders
The current SONYMA statute requires that lenders be approved by Fannie Mae or Freddie Mac, which can be a burdensome threshold for smaller community banks, community development financial institutions, and local credit unions to meet. Of the 139 credit unions that are designated to serve low-income areas of the state, just three currently offer SONYMA mortgages. Governor Cuomo will pass an amendment to the SONYMA statute to expand eligibility for becoming a SONYMA lender, greatly increasing the number of institutions able to offer SONYMA mortgage products in underserved communities and in the state overall.
Increasing Down Payment Assistance for Borrowers
One of the significant obstacles to homebuying is a lack of resources to cover the down payment and closing costs. The Governor will direct SONYMA to expand its Down Payment Assistance program for first-time borrowers by increasing the minimum Down Payment Assistance from $3,000 to $7,500, making homeownership a reality for low- and moderate-income families.
Stabilizing Homeowners in Times of Crisis
Communities that have been historically victimized by redlining have also felt the disproportionate impact of recent crises like the 2008 foreclosure crisis and COVID-19 pandemic. When low- and moderate-income homeowners experience financial disruptions like short-term loss of income or unforeseen expenses, lenders need the flexibility to provide temporary relief to borrowers through mortgage modifications. The Governor will pass an amendment to the SONYMA statute allowing SONYMA lenders to provide relief to borrowers in the face of major market events , in ways that are fiscally responsible. Interventions may include lowering mortgage interest rates, forgiving mortgage arrears, or renegotiating the terms of a mortgage to allow borrowers to stay in their homes during times of crisis.
The Governor will also direct SONYMA to raise awareness of its lending options through a targeted outreach campaign, which will include a combination of print, radio, social media advertisements. The Agency will also leverage partnerships with local elected officials, trade associations, nonprofits and the faith-based community for grassroots outreach in historically redlined and underserved communities.