For homebuyers impacted by racist housing covenants, Washington state offers zero-interest loans

A new program aimed at reducing the impact of racist housing deeds, which once forbade selling homes to various minority groups in Washington state, is taking shape.

The Covenant Homeownership Program, run by the state’s Housing Finance Commission, offers prospective homebuyers from those communities no-interest loans of up to $150,000 to cover down payments — one of the biggest hurdles to buying a home — and closing costs. Borrowers repay the loan upon selling or refinancing of their home.

So far, 34 people from the Puget Sound area have applied for zero-interest down payment loans through the Covenant Homeownership Program, with six applicants in the mortgage closing phase as of Thursday.

While the passage of the federal Fair Housing Act in 1968 stripped away the power of racist housing covenants, the effects of that exclusion span several generations and are still felt today.

“Redlining may not be as blatant today, but it still exists — let's be clear — and it's through affordability,” said Jessica Talton, a mortgage loan officer with the Kent-based Movement Mortgage, a partner of the Covenant Homeownership Program.

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Many first-time homebuyers rely on assistance from family and friends to make them. But for communities where generational wealth is lacking, loved ones are rarely able to fill those gaps.

“We've had people…break down in tears and talk about what this [program] is going to do for their family,” Talton said.

On Wednesday, she helped a family close on a $719,000 house using a $143,800 zero-interest down payment loan from the Covenant Homeownership Program. The remainder of the costs were financed through Movement Mortgage.

Although the Covenant Homeownership Program serves various racial communities, it was born from the Black Home Initiative. The initiative is run by a coalition of nonprofits and community groups working to address growing racial disparities for Black would-be homebuyers.

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That disparity is something Michael Brown, chief architect of the Seattle Foundation’s Civic Commons initiative, said he was aware of. But he was surprised to learn the numbers behind it:

“Four in 10 Black Washingtonians have zero net worth," he said. "You cannot play in a home ownership space…which is the biggest way that folks build an asset and accumulate wealth.”

While people might have enough to pay for a mortgage or rent, he added, they may not have enough to make a down payment on a house — and that’s where the Covenant Homeownership Program can step in.

Applicants who meet the following criteria could qualify for the program:

• Households with an income at or below 100% of the Area Median Income.
• First-time homebuyers.
• Homebuyers who lived in Washington state before April 1968, or have a parent, grandparent, or great-grandparent who lived in Washington state before then.
• The individual who lived in Washington prior to April 1968 is Black, Native American, Hispanic, Alaska Native, Native Hawaiian or other Pacific Islander, Korean, or Asian Indian.

To apply for the program, call the Washington State Homeownership Hotline at 1-877-894-4663.