Bank of America Tests a Zero Down Payment Option for First-Time Homeowners in Latino Communities — So What’s the Catch?

House Grail, a website dedicated to real estate news, estimates that there are roughly 5 million homes for sale in the United States at any given moment, in addition to the 1-1.2 million homes that are built each year.

A new program from Bank of America, focused on buyers in Black and Latino communities, is dedicated to filling some of those homes with families, especially those who are unable to put down a traditional down payment along with closing costs. The bank notes that being Black or Latino is not a requirement for application, instead opting to select recipients by zip code.

The Community Affordable Loan Solution, which was formally introduced on August 30, is an initiative that offers a zero down payment, zero closing cost mortgage to first-time buyers in marginalized communities. The pilot program will be deployed in Black and Latino markets in major cities across the country, including Charlotte, Los Angeles, Dallas, Detroit, and Miami, according to a press release from Bank of America.

The new initiative operates through a Special Purpose Credit Program that determines eligibility through an analyzation of credit based in on-time rent payments, utility bills, cellphone plans, and auto insurance without the need for mortgage insurance or a strong credit score.

Eligibility for the program is determined by both home location and individual income, and prospective buyers are required to take part in a homebuyer certification course before submitting an application, either through Bank of America or a HUD-approved counseling partner.

The Community Affordable Loan Solution will work in tandem with the already-existing Community Homeownership Commitment, a $15 billion dollar program that’s working to offer mortgages, grants, and educational opportunities to 60,000 individuals and families by 2025. As of this year, the Homeownership Commitment has helped more than 36,000 individuals and families purchase a home, with $9.6 billion dollars in low down payment loans and $350 million in down payment and closing cost grants.

Additionally, Bank of America’s longstanding relationship with the Neighborhood Assistance Corporation of America has allowed the bank to commit an additional $15 billion dollars to help low and moderate income buyers through May 2027.

The press release also notes the 30% gap between white and Black homeowners, and the 20% gap between white and Latino homeowners, a number that’s expected to grow in an increasingly competitive market. Prospective buyers will also have access to resources to better educate them on the home buying process.

According to NBC News, the head of neighborhood and community lending for Bank of America, AJ Barkley, said, “Homeownership strengthens our communities and can help individuals and families to build wealth over time,” adding, “Our Community Affordable Loan Solution will help make the dream of sustained homeownership attainable for more Black and Hispanic families, and it is part of our broader commitment to the communities that we serve.”

The New York Times reports that, in 2019, just 42% of Black Americans were homeowners, along with 58% of Asian Americans and 47.5% of Latino Americans. Compared to 73% of white Americans, the stark contrast is cause for concern, a gap that was only widened during the COVID-19 pandemic.

In January 2022, a study by the National Community Reinvestment Coalition revealed that just 13.7% of loans in low- and moderate-income neighborhoods were provided by private mortgage lenders, despite the fact that they represent 30% of neighborhoods.

That being said, commenters on both sides of the aisle are suspicious about the new policy, with more conservative voices calling it discriminatory towards those who are ineligible for the program, while people who support the program in theory are labeling it as dishonest and lacking context in terms of interest rates and related payment penalties.

Some are even comparing it to the subprime mortgage crisis that led to the 2008 crash, just rebranded for an era of more inclusivity and awareness of marginalized communities. “I don’t trust a single thing BoA does. Predatory is their middle name in matters dealing with money,” one commenter wrote on Twitter. “Who trusts them enough to take advantage of this program? Their history with the black community is incredibly tarnished and damaged,” reads another.

Bank of America has been the subject of multiple predatory loan accusations and investigations, especially with regard to minority communities. Many homeowners who have worked with Bank of America in the past are warning potential customers to steer clear of this new program.