Mortgage giants Freddie Mac and Fannie Mae announced Wednesday a series of actions that aim to make it easier to buy a home and close the racial homeownership gap, in which 72% of White Americans are homeowners while only 42% of Black Americans own a home.

The sweeping changes include down payment assistance, lower mortgage insurance premiums and a credit reporting system that factors in rent payment history. The enterprises are also expanding counseling services to support housing stability and plan to introduce technology that would improve access to credit and make home appraisals more equitable.

The plans were developed in response to a request last fall from the Federal Housing Finance Agency, which regulates Fannie and Freddie, to address discrimination in access to homeownership.

The plans represent Fannie and Freddie’s commitment to “sustainable approaches that will meaningfully address the racial and ethnic disparities in homeownership and wealth that have persisted for generations,” said Sandra L. Thompson, acting director of FHFA.

The need

Throughout much of this country’s history, Black people were denied full access to housing and homeownership, wrote Jeffery Hayward, Fannie Mae’s executive vice president and chief administrative officer, in a blog post. He goes on to describe the practice of legalized redlining, which effectively prevented swaths of the Black community during the post-World War II era from getting loans and buying homes.

“We at Fannie Mae believe this racist legacy is one of the root causes of economic disparity in our country,” he wrote. “To ignore this – to pretend that our history does not affect our country’s present and future – is not only wrong, it’s also economically destructive.”

Fannie and Freddie’s plans, he said, aim to better prepare prospective homebuyers and renters, increase diversity within the housing industry, eliminate barriers to first-time homeownership and improve access to affordable rentals.

Fannie and Freddie do not issue loans, rather they purchase loans from lenders to hold, sell or repackage as investments. Their role in the mortgage market helps lenders issue more loans and keep lending stable and affordable.

Two plans, similar goals

Fannie Mae’s plan offers several pilot programs aimed at removing unnecessary obstacles to first-time homeownership and access to affordable, quality rental housing.

Fannie’s actions will be focused on three main areas: credit building and financial education, removing barriers Black people face when buying or renting a home, and keeping homeowners and renters in their homes.

“We want to knock down these barriers, one by one, doing our part to undo the legacy of discriminatory practices that perpetuate racial housing gaps in America,” said David C. Benson, president and interim chief executive officer at Fannie Mae. “The plan is a solid step toward this goal and a milestone in our work to make housing stronger, fairer, and more sustainable for the people and communities we serve.”

Freddie Mac, meanwhile, said its plan aims to advance equitable opportunities for homebuyers and renters in several areas, including by encouraging the financing of more affordable housing, helping renters through tenant credit-building programs, providing market-based incentives to keep rents affordable, and improving access to capital for multifamily developers in Black and Latino communities.

In addition, it aims to address the racial homeownership gap by using a Special Purpose Credit Program, or SPCP, to purchase loans originated through lender programs that help expand homeownership in underserved communities. Under federal law, lenders may offer special underwriting or pricing for traditionally disadvantaged groups as part of a SPCP, including by lowering the cost of mortgage and title insurance.

“We plan to partner with lenders, investors and other stakeholders to make meaningful progress towards an equitable housing finance system that provides access to wealth, opportunity, and a sense of home to people and communities across the United States,” said Michael Hutchins, president of Freddie Mac.

Each enterprise will maintain a published list of their pilot programs and their progress on their respective websites to help determine how well the initiatives are working.