New Regulations Threaten Low-Income Homeowners
In 1997, a young African American preacher asked for the local office of the U.S. Department of Housing and Urban Development for approval to help 160 families purchase duplex homes in a struggling south Sacramento, Calif. neighborhood by giving them down payment assistance grants in order to obtain a mortgage insured by the Federal Housing Administration.
Unknown to him, or the families that bought these homes, the program that he conceived, the Nehemiah Program, helped launch the homeownership revolution of the late 1990s that saw African American and minority homeownership rise to unprecedented levels in the United States.
According to a 2004 study by the Milken Institute and the U.S. Conference of Mayors, the average low-income family making $35,000 that purchased a home between 1997 and 2003 experienced a net wealth gain of $18,000 because of being a homeowner. These families could not have purchased a home without the down payment assistance that the Nehemiah Program provided.
The name — Nehemiah — is important. The namesake that was chosen for the program was intentional. Born out of Antioch Progressive Baptist Church, the Nehemiah Program was named for the prophet well known throughout the Christian faith as the historic re-builder of cities. Like the Nehemiah of the Old Testament, this new Nehemiah was conceived to rebuild the American community one family and one neighborhood at a time.
The nonprofit group that housed this paradigm-changing program, Nehemiah Corporation of America, grew into one of the largest African American-led community development corporations in the United States with almost $200 million in revenue at its peak in 2004. The Nehemiah Program and its imitators that followed grew to over 40 percent of the Federal Housing Administration's annual mortgage production.
As of June 2007, National Homeownership Month, the Nehemiah Program will have helped more than 229,000 families purchase their first homes across every state in the country and has given out almost $900 million in grants without receiving a single dime from either government or foundations. Nehemiah created a model where its down payment assistance comes from revolving funds constantly replenished by contributions from the realtors, lenders and private home sellers across the country.
Today, however, Nehemiah's future is under assault. Like other Black institutions such as the NAACP, the federal government is attempting, by regulation, to end the down payment assistance model Nehemiah created by issuing a proposed regulation that would bar nonprofits or governments from offering down payment assistance where a seller makes a contribution to a fund that offers grants to working class homebuyers.
While some imitators of Nehemiah have engaged in practices that deserve increased regulation and oversight -- which Nehemiah supports and advocates -- the federal government is pushing an agenda which instead "mends it don't end it" seeks to absolutely ban a model that has helped so many.
Unlike the sub-prime loans that are currently under scrutiny because of terms and practices that take advantage of low-income homebuyers, 98 percent of Nehemiah grant families receive their loans combined with FHA insurance ensuring that the loans meet the Federal Government's requirements for fairness.
Indeed, some in the mortgage industry believe that the success of the Nehemiah Program led the mortgage industry to change its historic discriminatory practices and for better and worse start to view minority communities as viable markets for their products including sub-prime.
Cynically, this proposal is pushed by the HUD inspector general who has railed against Nehemiah and the low income families it serves since its beginning in 1997.
First, they claimed that giving down payments to those without savings of their own was helping those "unworthy" of homeownership. Later, they claimed that Nehemiah's default performance was higher than average.
After Nehemiah refuted their claims, they then forced FHA to issue this proposed regulation under the guise of trying to "protect the financial solvency of FHA" by killing this model knowing that if FHA loses the 40 percent of its current business, it might permanently cripple this program. In others words, the FHA's position is "In order to save you FHA, we must destroy you."
This is certainly a sad fate for an agency that has been the primary means for low-income and minority families to enter homeownership for over half a century.
Some believe that -- like the assault on the NAACP -- these cynical actions are not random, but a coordinated effort by those who care little for the aspirations of the underserved. They feel no guilt over the unpaid debt of the 40 acres and a mule that African Americans never received as uncompensated builders of this nation. Nehemiah today serves the descendants of these people, as well as the recent immigrant, and the families of single moms trying to make a better life for their children.
We can still save the Nehemiah model, which has helped more than 500,000 families nationally to finally stop living like 21st century sharecroppers. The public comment period for this regulation ends July 10, 2007. To find out more, go to www.getdownpayment.com or call your Congressional representative and United States Senator and tell them to contact HUD in opposition to the proposed regulation.
The Nehemiah Corporation believes that if you are a renter today, tomorrow you can be a homeowner. That is the promise of the American dream. Let us together recommit to preserving that dream for our children and the generations yet unborn. The future is ours to shape.
Scott C. Syphax is the president and CEO of Nehemiah Corporation of America.