“Give me the road map, and I’ll do it.” – Evelyn Burnett.
“I have lived up to society’s contract,” Sherrie Deans.
These two successful Black women have 800+ credit scores, lucrative careers, low income-to-debt ratios, and ample home equity in common. All of which should have made refinancing their homes a no-brainer for any lending institution. Unfortunately, because of their personal experiences with trying to do just that in 2020, their commonalities also include ever-growing weariness WITH and wariness OF America’s financial institutions.
Historic low mortgage interest rates in 2020 opened the door to a slew of refinancing options for homeowners. However, there are documented differences across racial groups in who was welcomed through that opened door and who, instead, had that door slammed in their face. (See Data Citation 1 and 2.) Clearly, the “American Dream” is not a monolithic experience available to all. As Sherrie and Evelyn’s experiences illustrate, for Black families who own homes in Black neighborhoods while hard work, achievement, and personal choices might get your foot in the door to refinance, it can still be slammed shut – and locked.
Imagine that you bought a home in 2007 for $675,000 with an appraised value of $920,000. The 4,000 square foot limestone mansion had been declared a landmark by the NYC Landmark Preservation Committee in 1983. Imagine that you discovered more than 25,000 sq ft of transferable air rights attached to the property when you were offered $1.3 Million cash in 2014. When Sherrie Deans and her husband purchased their home, which was built in 1986, they knew it would require some investment because of its age. However, with that investment having been made, nearly 15 years later, any reasonable adult would also believe that an improved property would lead to an accumulation of wealth that could be passed on to their children. Upon approaching the door to refinancing, attempting to combine her 1st and 2nd mortgage – the one that she and her husband used to improve it – the couple expected to be welcomed through the door. Instead, their experience began with the door slam of a low-ball appraisal of $688,000. To be clear, this is $13,000 more than they paid 15 years before and $230,000 less than it appraised for when they bought it and before they made any improvements to it.
While Sherrie knew that the uniqueness of her home would make it difficult to find other relevant comparable properties, she did not expect the appraiser to use sales as far back as 2019 that weren’t true comparables to her house in lot size, house size, quality or uniqueness. The inadequacies of similar homes, particularly her house’s square footage, were valued at 7%, which was 250% lower than all of the comps used without any explanation. After all, several homes had been sold in her immediate neighborhood in the million-dollar range. Then her written appeal for an appraisal reconsideration was denied. Door slammed shut and locked. Ultimately, Sherrie did not decide to not refinance; the system decided for her. Meanwhile, as recently as September 2021, Sherrie continues to receive unsolicited offers ranging from $1 – $2.3 million, from developers wanting to purchase her unique “Air Rights” landmark home that according to lenders somehow lost value in a booming market.
In November 2020, some 400+ miles away, Evelyn Burnett received an offer from the financial institution that has held both her personal and business accounts since the time that Sherrie Deans purchased her home. The offer was for a 2.75% refinance with no closing costs. Having vetted it with numerous of her colleagues who specialize in finance she decided to pursue the offer within three days of receiving it. However, upon contacting the lending institution she was told “We’ve never seen that offer.” Door slam number 1. Since she learned many lessons when she purchased this home in 2015, she persisted.
The first lesson from her 2015 home buying experience was that she and her family lacked the savvy necessary to “buy” a home since her parents’ home was passed down to them by her grandfather. The second lesson was that she would have to persistently question and push gatekeepers in the financial system; as what they told her was not always reliable. As an example, she was told would have to finance her mortgage with PNC bank since that was the bank used by her parents who were gifting her the $80,000 down payment. Unfortunately, she and her parents’ inexperience in homebuying meant that they did not have any knowledge to pull on to question this assertion. Like most people do when doing something new, she relied on the counsel she was given. Even with an $80,000 down payment on a $350,000 original mortgage, in 2015 the type of loan she was told she qualified for required her to pay Property Mortgage Insurance (PMI). According to Rocket Mortgage, first-time homebuyers situated like Evelyn should have a down payment requirement of 5%. (See Data Citation 5.) To be clear, that is $62,500 less than her original down payment. Rather than supporting Evelyn in securing the type of loan that would maximize the growth of her investment, the same gatekeepers of this flawed system fixated instead on questioning where her parents came up with this kind of money. A fact that is etched in Evelyn’s memory.
After convincing her current financial institution to honor their extended refinancing offer, Evelyn learned she would have to have an appraisal to determine if her property had enough value to support the refinance. The appraisal came back with a value of $290,000 according to the lender. Confusing, considering that her property is valued at $377,000 on Zillow, $414,000 at the county and more importantly considering the fact that the appraiser never even entered her home. Door slam number 2.
This is the very same door that was slammed in the face of Sherrie Deans. (See Data Citation 4.)
What started out as a simple refinance decision for Evelyn carried on for nearly long enough to birth a child. It became a game of “We now need this document,” or “You must meet with this person within the next 48-hours or the deal is off the table.” Having access to accountants and financial advisors for support, Evelyn was able to meet the demands and finally close on this refinance offer in June 2021. However, she walked away from that experience with the realization that people who had fewer resources than her may not have had the leverage or energy to pry open one slamming door after the next. Were her experience not exhausting enough, an insult to injury came when she learned that this same institution had a refinancing offer of 1.9% that no one bothered to inform her of throughout the lengthy process.
“I went through all that and still didn’t get the best rate. What do I have to do to get that?” Evelyn Burnett.
Wealth accumulation and race data clearly delineate that Sherrie and Evelyn’s experiences are not just a reflection or assertion of individual experience. Rather, their experiences, reinforced – widened their eyes even – to what the data already illuminated; what USI recognized years ago. (See Data Citation 3.)
We need substantive policy change in every system in this country and we need it now.
We cannot target enough strategies at enough Black children to eradicate the educational inequities that persist because education systems are structured to leave Black children behind. We cannot expunge enough records to reverse the harm created in Black communities by an unjust criminal justice system that incarcerates 1 in 3 of its men. We cannot implement enough wealth-building programs to erase or even fade the glaring red lines that failing financial institutions drew long ago around Black communities.
We cannot program our way to equity and justice.
Though they may not be blatantly marked “Whites Only” as they were in the past, they are reinforced with sophisticated hidden color sensing policies that give and deny access regardless of the color of skin of the person operating the door.
Following the murder of George Floyd in 2020, organizations across the country verbalized a historic number of commitments to act in ways that advance racial equity. As an organization of color, USI is calling for every organization that made commitments to move from talk to action.
How are you collaborating and aligning with partners to build accountability for them doing the same?
If it is the emotionality of the 2020 moment you need to fuel you from talk to action we ask you to consider Sherrie’s verbalized reality as you hold yourself accountable for this next, harder, body of work. When discussing her experience, she also shared the parallel difficulty of raising her Black sons in a world that continually under appraises their value.
“Everything I own is perceived less valuable because I own it,” Sherrie Deans.
Imagine that it is your home. Imagine those are your sons. Now, work with the same furor you would if this was your reality. The time to act is long overdue.
Wealth, Race and Homeownership Data
- Beginning in January and through October 2020, “it is estimated that only 6 percent of Black borrowers refinanced as compared with almost 12 percent of white borrowers” Gerardi, K., Lambie-Hanson, L., Willen, P. (2021) Racial Differences in Mortgage Refinancing, Distress, and Housing Wealth Accumulation during COVID-19. Federal Reserve Bank of Boston. https://www.bostonfed.org/publications/current-policy-perspectives/2021/racial-differences-in-mortgage-refinancing-distress-and-housing-wealth-accumulation-during-covid-19.aspx
- More broadly that means that “of an estimated $5.3 billion of savings for all households that refinanced during that 10-month period, only 3.7% went to Black households.” McCorvey, J., & Carpenter, J. (2021, June 25). Millions of Americans Refinanced Last Year—but Fewer Black and Latino Homeowners Did. The Wall Street Journal. https://www.wsj.com/articles/trump-administration-to-say-israeli-settlements-arent-illegal-11574104691
- “Median white household has 10 times the net worth of the median Black household” ($171,000 to $17,000 respectively). While Black households have about 3% of all household wealth in America, the 400 richest American billionaires have more total wealth than all 10 million Black American households combined. Even when Black people have advanced degrees, own their home, have high paying jobs, and engage in other behaviors associated with asset building, their wealth is typically much lower than their white peers.” Williamson, V. (2020) Closing the racial wealth gap requires heavy, progressive taxation of wealth. The Brookings Institution. https://www.brookings.edu/research/closing-the-racial-wealth-gap-requires-heavy-progressive-taxation-of-wealth/
- “Andre Perry, an African-American Brookings Institution research fellow, published a study in 2018 that found homes in majority-Black neighborhoods were undervalued by $48,000 on average compared with those in neighborhoods where fewer than 1% of the residents are Black.” Mock, B. (2021, March 3). What It Will Take to Close the Race Gap in Home Appraisals. Bloomberg CityLab. https://www.bloomberg.com/news/articles/2021-03-03/appraisers-acknowledge-bias-in-home-valuations
- For first-time home buyers, even if they “do not earn more than 80% the median income in the area the down payment requirement is 5%” Rocket Mortgage. (2021, December 8). What Is A Conventional Loan? https://www.rocketmortgage.com/learn/conventional-mortgage
USI’s focus on Economic Liberation
USI provides intensive support for families living in disinvested communities that are going through revitalization, 95% of whom are persons of color. In our work, we place a relentless focus on empowerment, stabilization, and opportunity creation for Black and Brown individuals. Across the country, we partner with financial institutions, philanthropy, and housing authorities to build the rates of homeownership. We build employer pipelines that deliver education, training, and support to move individuals to living-wage employment. As a certified Community Development Financial Institution (CDFI), we work to propel individuals, families, and communities to prosperity and economic liberation through the creation of middle income and wealth-generating jobs and businesses. As part of our wealth-building strategy, operating as a nonprofit loan fund, USI seeks to provide equitable and accessible capital to Women and Minority-Owned Business Enterprises (W/MBEs). With over 40 years of experience partnering with families who are labeled “low-income” we understand the unique barriers to wealth building experienced by people of color and will continue to work with full humanity and a theory of change that centers on personal, familial, and neighborhood equity and justice. Though USI has advanced a policy change agenda for the past 5 years, recently, through the generous funding of the Robert Wood Johnson Foundation allows us the opportunity to expand the impact of our Policy and Influence pillar. We commit to advancing a policy change agenda in alignment with our partners that focus on economic liberation for the Black, Brown, and Indigenous families living in the communities we serve and beyond.
Communities of Choice
To extend our support to other communities, USI created Communities of CHOICE (COC). The COC is a national forum of Choice Neighborhood Program grantees from across the country a chance to connect, share best practices and innovations, receive mentoring and hands-on support, and experience meaningful engagement to lift our collective voice in the spirit of community development.
We invite any Choice Neighborhood Program grantees to sign up.
About the Author: Kristie Stutler is the Vice President for Policy and Influence at USI. She has a Masters of Science in Social Work, 16 years of experience working with system-involved youth, and 3 years of experience leading statewide juvenile justice reform in Kentucky. Prior to her current position at USI, she was the Southern Regional Vice President. Kristie is a graduate of the Annie E. Casey Children and Family Fellowship, is a Certified Meyers-Briggs Type Indicator (MBTI) Practitioner, and is certified in Diversity and Inclusion through Cornell University.