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Bank of America started a trial program aimed at helping first-time homebuyers in Black and Hispanic neighborhoods by offering mortgages that don’t require down payments, closing costs or minimum credit scores, all considered longtime obstacles to narrowing the gap between White and minority ownership. Customers using the program will be evaluated for a home loan not by credit scores, but rather factors such as their history of making rent, utility, phone and auto-insurance payments on time.
“Lower-down-payment loans perform worse, all things being equal -- but all things are not equal,” said Laurie Goodman, an institute fellow at the nonprofit Urban Institute, speaking generally about such programs and not BofA’s in particular. “There is a way to offer these loans where it isn’t as risky, where other factors can more than compensate for a low down payment,” and there is an argument, she added, for taking on “a slightly higher probability of default in order to give people the opportunity to build wealth.”
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