Celebrating Black History Month: Q&A with Phyllis Caldwell, former Treasury official
As we celebrate Black History Month, USMI reached out to prominent leaders in the housing finance and mortgage industries to discuss their work and perspectives on the goal of increasing Black homeownership in America. While homeownership has risen over the past few years, so has the growing recognition of the significant racial and economic disparities in mortgage lending and access to affordable mortgage credit, especially in the wake of the COVID-19 pandemic. Of the 2.6 million homeowners that are currently past due on their mortgages, as reported by the Mortgage Bankers Association, over half of them are people of color, according to Census Bureau Household Pulse Survey data for the period of January 16-18, 2021. This situation presents an opportunity for policymakers to correct inequities and better support minority homebuyers.
For more than 60 years, the private mortgage insurance (MI) industry has enabled more than 33 million low- and moderate-income Americans to attain affordable and sustainable homeownership in the conventional market. In the past year alone, nearly 60 percent of borrowers who purchased their home using private MI were first-time homebuyers, and more than 40 percent had incomes of $75,000 or less. It is a goal of the MI industry to work with regulators and lawmakers to increase minority lending within the conventional mortgage market, and Black History Month is a perfect time to advance this conversation.
(1) How does Black History Month intersect with the issue of homeownership?
I think it is important to remind ourselves that while we focus on Black history during the month of February, Black history is America’s history and homeownership is very much a part of the American story. The intersection of Black History Month and homeownership is most meaningful when we do the following: (i) reflect on the current state of Black homeownership with its existing disparities across race and neighborhood; (ii) deepen our collective understanding of how past government policies fostered neighborhood racial segregation; and (iii) strengthen our resolve to create an equitable path forward.
Black History Month is also a time to remember the positives of Black homeownership and historically Black neighborhoods. While the legacy of racial segregation has certainly contributed to some of the inequities we still see today, there is also a rich history of neighborhoods—including the U Street Corridor in my hometown of Washington, DC—which were the center of African American homeownership, business and culture. Other examples that come to mind are Oak Cliff in Dallas where I lived briefly in the 1980s, and of course Harlem in New York. As these neighborhoods change with revitalization and gentrification, this history of thriving Black neighborhoods and homeowners should not be lost or relegated just to February.
(2) What are the top two or three 2021 priorities that lawmakers and the new Administration should focus on related to housing finance?
Increasing the supply of affordable housing in high opportunity neighborhoods has to be a key part of any housing finance program. Absent an increase in supply, many well-intentioned programs, such as down payment assistance or widening credit box, will increase demand and put further upward pressure on price. Increasing supply will require a strong partnership between the Biden Administration and city/state governments as housing forces are local. There are some metropolitan areas, such as Nashville, where Black homeownership rates are actually rising, and it is important to understand and learn what those cities are doing right.
A second housing priority for the new Administration should be to strengthen and support the existing government mortgage finance programs, such as the ones offered by the Federal Housing Administration (FHA) and the Department of Veteran Affairs, which play a major role in Black homeownership, and to commit to comprehensive housing finance reform including the reform of the government sponsored enterprises (GSEs). Today FHA is about 12 percent of the mortgage market, but it represents over 30 percent of minority home purchase activity. Housing finance reform should address those issues that keep the system strong without unnecessarily raising the overall cost of mortgages—further exacerbating the cost of homeownership.
While not a homeownership finance policy, I hope the new Administration will also break down the silos between homeownership and rental housing policies—both to consider ways to help more renters become homeowners and to expand tools, such as the Low Income Housing Credit, that support the supply of affordable rental construction and preservation. Strong and vibrant communities have a mix of housing stock and policies should look at ways to replicate this in other communities.
(3) Can greater homeownership racial equity be achieved in the next 5 to 10 years in America, and what must happen to increase the rate of Black homeownership?
I am an optimist at heart and believe we as a society can make greater progress toward racial equity over the next 5 to 10 years. I am also a housing policy geek and have bookmarked or saved every “five point plan” or “first 100 day plan” submitted from the many groups in the housing industry. Rather than choose from many good policy ideas, I am sharing the themes that resonate.
First, the economic response to the COVID-19 pandemic must address inequities particularly in education and employment that contribute to homeowner readiness. Second, we have to rebuild trust in the homeownership ecosystem—realtors, mortgage lenders, appraisers, among others to ensure Black prospective homeowners believe they are being treated fairly and respectfully. This can happen through increased attention to racial and ethnic diversity in our industry but also calling out biases when we see them such as the recent negative press on differing home values based on the race of the owner or flaws in a credit scoring model. Finally, we need a bias toward action. It is easy to get consumed by the politics of housing and homeownership and the search for the best outcome. We are at a moment or reckoning and the most important thing is to look at what is working and take action now.
Phyllis R. Caldwell’s Biography
Phyllis Caldwell is an independent financial service professional and founder and sole member of Wroxton Civic Ventures, LLC., which offers advisory services and impact investments to small and emerging social enterprises. She currently also chairs the Board of Directors of Ocwen Financial Corporation (NYSE: OCN) and is on the boards of Enterprise Community Partners and City First Bank of DC.
Phyllis has over 25 years of experience in housing and community development finance in the corporate, government and nonprofit sectors. She served at the U.S. Department of Treasury under President Barack Obama where her team was responsible for implementing the Home Affordable Modification Program (HAMP), and other foreclosure prevention initiatives established through the Troubled Asset Relief Program (TARP) during the recovery from the 2008 Great Recession. Previously, Phyllis was president and CEO of Washington Area Women’s Foundation. She retired from Bank of America in 2007 where she held various executive roles including President of Community Development Banking and leading a national team in tax credit investing, community development lending, investments in Community Development Financial Institutions and small business venture funds.
Over the course of her career, Phyllis has served on several nonprofit boards including Low Income Investment Fund (LIIF), Community Preservation and Development Corporation (CPDC), and Center for International Forestry Research in Bogor, Indonesia. In addition, she was a member of the Community Development Advisory Committee for the Federal Reserve Bank of Richmond.
Phyllis received her MBA from the Robert H. Smith School of Business at the University of Maryland, College Park and is an Executive-in-Residence at the Smith School. She holds a bachelor’s in sociology and urban planning, also from the University of Maryland, College Park.