Every study has demonstrated that our nation’s twenty million Asian Americans seek the American Dream of homeownership. Among many Asian American groups, including Filipino Americans and Vietnamese Americans, the percentage is well-over 95% or even higher than for Whites.
But this American Dream is decreasingly available to most Asian Americans. Why has this occurred when our family incomes are almost 50% higher than for Whites? And, why are homeownership opportunities decreasing for most Asian American sub-ethnic groups?
Partly, as a result of complaints raised by the National Asian American Coalition and many Black and Latino groups, the new Secretary of HUD, Julian Castro is considering some changes that could help Asian American homeownership.
Similarly, Mel Watt, the new Administrator of FHFA, is considering a number of changes. But, as most experts understand, the primary problem in boosting homeownership opportunities are undue and excessive cautionary restrictions, many of which are artificial, imposed on banks generally by federal government agencies that think they are helping us. For example, the U.S. Department of Justice forced Bank of America to pay $17 billion in penalties for making predatory home loans.
The problem, however, is that these subprime and deceitful loans were not made by Bank of America, but by a subprime company, Countrywide. And, instead of punishing the CEO of Countrywide, Angelo Mozilo, they have punished BofA, which purchased the loans as it rescued Countrywide from bankruptcy. As a result, BofA and a number of other big banks who have felt the lash of federal regulatory fury, have decided, in large measure, to not lend to anyone who does not make at least a 20% down payment and has a FICO score of 720 or above.
As a result, virtually all Asian Americans who face foreclosure or engage in a short sale are not considered credit worthy. Further, any Asian American or any other American who runs an independent business is punished because they do not have clearly documented and predictable income.
Both the Problem and Opportunities are Greater than a Federal Reserve of the President Know
The Chairwoman of the Federal Reserve, Janet Yellen, and President Obama, whom she advises on many monetary matters affecting homeownership, have continued to refuse to collect data on homeownership or homeownership problems separately for major Asian American sub-ethnic groups.
For example, Indian Americans, who have the highest incomes in American and are disproportionately employed at major corporations, such as Apple, Google, and Facebook, have increasingly high homeownership rates. In contrast, Vietnamese Americans, who are primarily entrepreneurs, have very low homeownership rates. We know this, but the federal government does not know this. Nor do Governor Brown and his main housing agency CalHFA know this, which tries to ignore any problems unless they are clearly confronted with the problem.
Over the last four years, the National Asian American Coalition, as the largest pan Asian American HUD-approved home counseling organization in the nation, has unsuccessfully attempted to require the federal government to collect data separately for each major sub-Asian American ethnic group. We will try again when we meet with the key Asian American congresspersons and the new leaders of the Senate and House banking committees when we are in Washing, D.C. next week.
We will also attempt to secure strong support from the Federal Reserve, the key banking regulators and, most importantly, from the head of the Consumer Financial Protection Bureau, Richard Cordray. (We met with him on October 3rd in Irvine, California on some of these issues.)
An Asian American Prescription to Enhance Homeownership, Create up to One Million New Jobs and Ensure a Speedy Economic Recovery
Janet Yellen, the first woman Chair of the Federal Reserve, has informed the President that the key to full economic recovery is to promote responsible homeownership. We suggest the following changes that could help create two million additional homeowners a year and one million additional jobs a year, including well-paid jobs in the construction industry:
The government purchase any bank home loans where the credit score is 600 or above and the family makes a minimum of a 5% down payment and agrees to a mandatory Responsible Home Counseling and Education Program.
Where appropriate, the banks be allowed to charge a maximum risk premium of up to 1% additional interest (for example, from 4% to 5%) for the first five years. Where the homeowner makes prompt payments for the first five years, the interest rate will then return to 4%.
Today, no major bank and virtually no financial institution has any confidence in the recent proposals by HUD or Fannie/Freddie. And, of course, the banks, intimidated by multibillion dollar penalties, fear to make a home loan to any American, without regard to ethnicity, if they don’t have a close to perfect score, make a very large down payment and work for a large corporation like Apple.
(Faith Bautista and Eric Le)
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Eric Le is the CEO of a construction company and the founder of the Vietnamese and Laotian Community Alliance for San Diego and Orange counties.
