Special Purpose Credit Program

Special Purpose Credit Programs:
An Innovative Tool to Overcome Inequalities in Mortgage Lending

Special Purpose Credit Programs (SPCPs) were created as a provision of the Equal Credit Opportunity Act as an extension of our nation’s Fair Housing laws. SPCPs were included in the Equal Credit Opportunity Act to expand access to credit for communities and populations that have historically lacked equal access to credit. The Homes by CFE program was created as an SPCP to expand homeownership opportunities for Black and Latinx families in the District of Columbia, where equal access to affordable mortgages in these communities has been lacking for a long time. 

Minority homeownership rates in D.C. lag far behind the country nationally. The rates of homeownership for Black/African-American and Hispanic/Latinx populations are far behind those of white and Asian-American residents. As a result of that and its high housing costs, D.C. has one of the lowest homeownership rates in the country. In the first fiscal quarter of 2021, D.C. had a homeownership rate that was 38% below the national average, and the homeownership rate has declined in D.C. by 8.2% since 2005. In particular, the high-priced D.C. housing market frustrates the efforts of cash-strapped, low- and moderate-income residents—especially Black and Latinx individuals—to buy a home. According to a study by Apartment List relying on 2015 data, 63.7% of white D.C. residents and 64.4% of Asian residents are homeowners, while only 43.5% of Black residents, 43.4% of Hispanic residents own homes.

This mirrors the growing income inequality in D.C. Despite paying rents that are significantly more expensive than the typical mortgage, many Black and Latinx community members have either been priced out of the purchasing market or so profoundly impacted by economic inequities that they lack the savings to cover increasing down payment and closing costs. The Federal Reserve’s 2019 Survey of Consumer Finances observed that the median value of all financial assets held by families was only $25,700 in 2019. Lower-income families are likely to have even fewer assets. Families earning the national median income in 2019 of $75,000 fell in the 50-75th percentile of household incomes. Households within this percentile range had, on average, between $4,000-$10,000 in their bank accounts—far below what would be required to put 20% down on a home.

 Although D.C. is a challenging housing market for any LMI (Low to Moderate Income) individual, D.C. has a history of racial discrimination in housing that has resulted in racial housing and wealth gaps. Today, Black and brown LMI individuals are disproportionately burdened when accessing mortgage financing. The inequitable access to homeownership perpetuates cycles of racial segregation and limits the upward mobility of Black and brown residents. The Urban Institute reports that “lack of black homeownership is also the main reason white households in D.C. reported a net worth 81 times greater than the city’s U.S.-born black households in 2014.

Homes by CFE levels the playing field by offering critically needed financial assistance to Black and Latinx homebuyers who are otherwise mortgage-ready. We do this by using the Special Purpose Credit Program framework, developed by the federal government to assist organizations in creating targeted lending programs that benefit populations with unmet credit needs, which traditional lending services have historically underserved.  

Special Purpose Credit Programs provide much-needed clarity on how lenders like City First Homes can reach borrowers who need assistance the most. Our program helps Black and Latinx borrowers overcome the barriers and fill the gaps that perpetuate deeply entrenched inequities. Homes by CFE’s mission is to give these borrowers a more equitable and fair playing field that counteracts the effects of historic disinvestment. 

Where can you learn more about Special Purpose Credit Programs?

Using special purpose credit programs to serve unmet credit needs

How People-Based Special Purpose Credit Programs Can Reduce the Racial Homeownership Gap

“The persistent racial gap needs to be addressed and we should work to speed up efforts to put sustainable homebuying within reach for more Americans.”

– Lindsay Johnson