Minneapolis is spending nearly $1 million to increase homeownership in the city, especially among minorities.

The Homeownership Opportunity Minneapolis (HOM) program will offer $840,000 for affordability assistance and $100,000 for outreach efforts that are expected to help 125 families this year.

"We're trying to build trust in these communities and regain homeownership as a good, stable investment for families in the city," said Cherie Shoquist, a principal project coordinator for the city.

Minneapolis has long had one of the biggest racial disparity gaps the country, meaning the share of white households that own their homes far exceeds the percentage of nonwhite households that own their homes.

The announcement comes a day after HUD announced a settlement with Associated Bank, which has been accused of a discriminatory lending practice called "redlining."

The deal requires the Green Bay, Wis.-based company to invest nearly $200 million in new mortgages in diverse, economically challenged communities in the Twin Cities and other markets.

Associated, a relative newcomer to the Twin Cities, was the 10th-largest lender in the Twin Cities in 2013 for mortgage originations and has 17 branches throughout the Twin Cities metro and almost 400 employees.

Since late last year, Associated and other lenders and housing professionals have been participating in a voluntary program aimed at increasing minority homeownership in the state. The Homeownership Opportunity Alliance was launched several months ago by the Minnesota Homeownership Center, which is also promoting the city's HOM program with the help of Minnesota Housing.

With the foreclosure crisis waning, those groups and others are stepping up their efforts to help disadvantaged families become homeowners. Until recently, such groups have been focused on helping homeowners avoid foreclosure.

"We want to make sure that communities of color are not being left behind by this recovery," said Ed Nelson, the Homeownership Center's communications manager.

CoreLogic said Wednesday that the number of homeowners in the Twin Cities who are behind on their mortgage payments, or in foreclosure, has fallen dramatically in recent months.

The city's HOM program will provide up to $7,500 in down payment and closing-cost assistance to eligible Minneapolis home buyers in the form of a zero-percent interest loan, without a monthly payment.

The loan will be forgiven after the homeowner lives in the home for five years, and the money can be used toward any single-family home, duplex, townhouse or condo anywhere in Minneapolis. Eligibility is based on income.

"We've been in crisis mode working on foreclosure recovery," said Shoquist. "But with foreclosure numbers dropping we're now able to take a breath and get back to preforeclosure crisis issues."

Jim Buchta • 612-673-7376