NY to offer more mortgage assistance in low-income areas, in effort to close racial wealth gap

New York’s low-interest loan program will offer larger down-payment assistance loans, expand to more lenders and give additional help to homeowners in distress, in an effort to close the wealth gap between whites and minorities, state officials said this week.

Gov. Andrew M. Cuomo said he will direct the State of New York Mortgage Agency, or SONYMA, to increase the minimum amount of down-payment assistance loans from $3,000 to $7,500, among other changes. The interest-free down-payment loans can be forgiven after 10 years, and can cover up to 3% of the purchase price.

The state also plans to make it possible for more small banks, community development financial institutions and local credit unions to become eligible to offer SONYMA loans in low-income areas, and it will allow SONYMA lenders to help struggling homeowners by lowering interest rates, forgiving debt and making other changes to loan terms, he said.

The program's current mortgage rates are as low as 2.625%. It is open to first-time buyers who meet certain criteria, such as income and purchase price limits.

"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," Cuomo said in a statement on Monday. "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."

A typical white family had a net worth of $171,000 in 2016, nearly 10 times greater than the net worth of a typical Black family, the Washington, D.C.-based nonprofit Brookings Institution reported last year. One reason for the gap is redlining, or denying access to credit in predominantly Black communities, the policy group said. The practice was named for the red lines the federal government and lenders drew on maps, starting in the 1930s, to mark off areas deemed risky for federal mortgage loans. The wealth gap cannot be fully explained by differences in income, indebtedness or education, the policy group found.

Helping more people become homeowners is beneficial to anyone hoping to increase wealth, not just minorities, said Quentin J. Hardy, a Long Island area manager for South Carolina-based lender Movement Mortgage and author of "A Guide to Becoming a Homeowner for African Americans." The book is available at yourqualifier.com.

Hardy, who is Black, said he and his wife spent a year living with his parents to save up to buy their first home in Freeport in 1997 for $160,000, and got help from relatives to amass a 3% down payment for their Federal Housing Administration loan. Five years later, they sold the house for double the amount they paid, he said.

"The single greatest thing that most people can do to positively impact their financial future is to become a homeowner," he said. "Anything we can do for any group, not just Blacks, that increases homeownership and increases it in a way that can be sustained... that's going to have a positive economic effect on that group."

Elaine Gross, founder and president of the Syosset-based nonprofit Erase Racism, cautioned that as the state expands the program, it needs to make sure buyers don’t take on more debt than they can handle.

"A program like this, if done right, will be beneficial," she said. "One of the big pitfalls you don't want is for people to get into a house and then not be able to stay there."

By Maura McDermott

maura.mcdermott@newsday.commauramcdermott

Maura McDermott covers education. Since joining Newsday in 2012, she also has worked on the investigations team and covered real estate and the business of health care.