100 Million With Criminal Record: Impact on Real Estate

April 25, 2016

Each year 650,000 Americans are released from prison, according to federal data. That adds up. And by some estimates, almost a third of Americans have a criminal record. This figure includes the many people who have a record for a minor infraction, or an infraction that occurred a long time ago.

This relates to housing because the U.S. Department of Housing and Urban Development (HUD) recently released guidelines to help rental housing managers and real estate brokers create a non-discriminatory housing policy for working with people with a criminal record.

Of course, people with a criminal record are not a protected class under the Fair Housing Act, but minorities are, and minorities are disproportionately represented among those with a criminal record, according tho HUD.

Under the government's guidance, the goal is to take a nuanced view when creating a housing policy. Thus, if your policy makes a blanket rejection of anyone with a criminal record, it's likely to have a disparate impact on minorities. So the guidelines recommend you take other factors into account. Was the infraction a long time ago? Was it relatively minor?

To help you, the government created a Dos and Don'ts chart. Among their advice is the recommendation that you take into account whether an individual undertook rehabilitation. Another is whether the individual, if the infraction involved a controlled substance, was convicted of mere possession or distribution.

How to account for a criminal record in your housing policy is a top story in The Voice for Real Estate, NAR's news video. The video also looks at these top real estate stories: 

Rural home loan availability: NAR's effort to improve the availability of federally backed loans in rural areas by making the Rural Housing Service loan program more user friendly. Right now, every time a lender writes a loan under the RHS program, it has to get upfront approval from the federal government. That puts loan applicants at a competitive disadvantage with other borrowers. That's because in no other federal mortgage loan program is upfront approval required. NAR's solution is to make RHS more like the other federal loan programs, which today account for the lion's share of loans.

Reverse mortgages: About a million of these mortgages have been made since FHA started insuring them in 1988. The loans are intended to help home owners 62 years of age or older access the equity in their home if they have or all or most of the mortgage paid off.

The issue for real estate professionals is the pay-off requirements FHA imposes, which can be confusing if you're not familiar with them, and thus raise implications if you're listing a home for sale that has a reverse mortgage. The main issue is timing. Once the home owner moves out of the house, perhaps to live in an assisted living facility, a clock starts ticking before the mortgage is foreclosed on by the lender. So, if the kids or the estate want to sell the house, they have to do it against this ticking clock. There are other issues, and the video gives a thumbnail sketch of them and invites you to access a webcast REALTOR® Magazine hosted on the topic.

—By Robert Freedman, REALTOR® Magazine