Richard Ferguson is president of CBC Mortgage Agency, a nationally-chartered housing finance agency and a leading source of downpayment assistance that helps low-income consumers, often in minority neighborhoods, achieve the dream of homeownership.
Ferguson graduated from Brigham Young University with a degree in economics. He began his career as a loan officer in 1993, becoming a top producer. In 2000, he helped to build one of the nation’s largest downpayment assistance providers, which he left in 2004.He later co-founded a business finance platform in 2006, which was later acquired, to provide credit and financing opportunities to small businesses. Ferguson has also been an investor in several companies involving technology, manufacturing, retail and renewable energy.
In 2013, Ferguson was recruited to lead CBC Mortgage Agency in providing responsible homeownership solutions to deserving homeowners.
National Mortgage Professional Magazine recently had the opportunity to sit down and chat with Richard to discuss the role of CBC Mortgage Agency and downpayment assistance in today’s mortgage marketplace.
The Urban Institute recently released a report entitled “Breaking Down the Black-White Homeownership Gap.” What is your key takeaway from the report?
The report brings into focus a huge racial disparity in homeownership, with nearly 72 percent of White adults owning property, while less than 42 percent of African-American adults own their homes.
What is the biggest factor in the disparity?
Income was identified as the biggest factor in the gap. Though the median income in the U.S. for White households exceeds $61,000, the median income for African-American households was less than $39,000. If the disparity in income were eliminated, the homeownership gap would be slashed by 31 percent.
Was income the only factor in the disparity?
No. The report also highlighted how African-American households are less likely to marry. If the marriage rate were the same between African-American and White consumers, then the homeownership gap would be cut by 27 percent.
Another factor is credit scores. More than half of White households have a FICO score higher than 700. But among African-American households, just 21 percent have credit scores of more than 700. In addition, more than a third of African-American households don’t have enough credit to generate a credit score, while that share is just 19 percent among White households. Without the credit score differences, the gap would be reduced by 22 percent.
Are there any other factors impacting the homeownership disparity that aren’t mentioned in the report?
Richard Ferguson: Definitely. One of the biggest factors is intergenerational family wealth. White families are far more likely to have the resources to help family members with a downpayment for a home purchase. But that level of wealth is lacking among African-American families.
The lack of family wealth also plays a role in credit scores, since African-American families are less able to provide financial assistance to family members who are in distress.
How does downpayment assistance, such as the programs offered by CBC Mortgage Agency, impact homeownership disparity?
Richard Ferguson: That’s a great question. Downpayment assistance programs can have a huge positive effect on the ability of African-American households to transition from renters to homeowners because they help eliminate the gap created by the lack of intergenerational wealth.
Not only does it provide African-American families with the ability to make a downpayment, but giving these families an ownership stake in their community makes the community itself better. That is because there is a newfound pride of ownership by these families, incenting them to take better care of their homes and play a bigger role in the welfare of the community.
Our own research
has found that more than 90 percent of downpayment assistance recipients would not have been able to purchase a home without such assistance.
HUD has stated that downpayment assistance has a negative impact on FHA performance. Is that an indication that downpayment assistance will lead to more foreclosures?
No. It’s true that the FHA has suffered losses from downpayment assistance in the past, but that was before the financial crisis, when home sellers indirectly provided the assistance and raised the price of the property to cover it.
Seller-funded assistance is no longer around, and today’s downpayment assistance programs like CBCMA’s don’t have the same effect on FHA loan performance. This is supported by a report
prepared for the Federal Reserve Bank of St. Louis by the Harvard University Joint Center for Housing Studies that indicated downpayment assistance has no significant impact on loan performance.
HUD must consider this evidence—that downpayment assistance does not have a harmful impact on FHA risk—and avoid tampering with these valuable programs that are successfully helping bridge the racial gap in U.S. homeownership and helping to make FHA a better option for all consumers.