Inclusive Lending

How HUD is Serving the Underserved

It is becoming common knowledge that the housing market is constantly in flux. This is not new. The market and the mortgage industry itself have changed often, sometimes drastically, since mortgages became a mainstream product in the 1930s. Some of these changes have been helpful and some, like discriminatory lending, have been harmful.

The U.S. Department of Housing and Urban Development (HUD) was created in 1965 as part of the War on Poverty to help regulate those changes to the housing market. It is a federal agency made up of a collection of older agencies, including the Federal Housing Administration (FHA). HUD was created by the federal government to address and manage issues related to homeownership, including homelessness, community development, and fair housing.

In 1968, another major change occurred in the housing industry. The Fair Housing Act was passed, making most discriminatory housing practices illegal. This act gave HUD the responsibility of enforcing antidiscrimination laws and taking steps to move towards equity in housing.

According to HUD, "The obligation to affirmatively further fair housing requires recipients of HUD funds to take meaningful actions, in addition to combating discrimination, that overcome patterns of segregation and foster inclusive communities free from barriers that restrict access to opportunity based on protected characteristics."

2022–2026 Strategy goals

In 2022, HUD released its FY 2022–2026 HUD Strategic Plan entitled One HUD, For All. It outlines five strategic goals for the four years based on four core values, Accountability, Efficiency and Effectiveness, Fairness and Respect, and Integrity. The breakdown of the first goal is as follows, taken from the HUD website:

Strategic Goal 1: Support Underserved Communities – Fortify support for underserved communities and support equitable community development for all people.

1A: Advance Housing Justice – Fortify support for vulnerable populations, underserved communities, and Fair Housing enforcement.

1C: Invest in the Success of Communities – Promote equitable community development that generates wealth-building for underserved communities, particularly for communities of color.

These goals mirror an ongoing commitment to repair the damage that systemic discrimination has done to marginalized communities, particularly when it comes to homeownership.

Current Progress

New Policies on FHA Loans

FHA loans are an important tool used by HUD and FHA to help borrowers buy a home who might be limited by the qualifications of other home loans. Recently, the FHA updated some of its policies to make it easier for borrowers to qualify for loans. They include changes to the way student loan debt is calculated and the effect of rental payments on the approval process.

AFFH Rule – HUD is currently working on a “final rule” that applies to the Affirmatively Furthering Fair Housing (AFFH) rule. This rule will build on the previous one of the same name in order to continue to fulfill the obligations mentioned above to actively take steps to further fair housing. It includes mechanisms for accountability and structures to better measure progress and a more significant community engagement requirement.

Discriminatory Effects Rule – In 2023, HUD restored the Discriminatory Effects Rule. This rule is “a tool for addressing policies that unnecessarily cause systemic inequality in housing, regardless of whether they were adopted with discriminatory intent.” It remains a significant part of case law able to be used in Fair Housing Act cases where discrimination may be present.

In addition to those changes, HUD has also addressed and removed some systemic barriers to homeownership allowing around a quarter of a million Black homebuyers to purchase a home in the last three years. It also granted fair housing organizations $30 million in 2023 to aid them in fighting against housing discrimination.

As the mortgage industry continues to shift and change, lenders will need to change their practices. New American Funding (NAF) was built on a commitment to serving the underserved in mortgage lending and continues to actively work to increase equity in homeownership. From creating initiatives to educate and empower marginalized communities to working with the FHA to offer more accessible home loans, NAF is dedicated to providing opportunities for members of all communities to own a home.