Preserving the Nation’s Housing Market
By Charlene Crowell
The State of the Union address is the only time of the year when all branches of government come together for updates on recent achievements and plans for new initiatives over the coming year. On January 28, President Obama’s speech spanned a wide range of issues from the environment to middle class security, tax reforms and more. Yet one key issue that received only a brief mention has a $10 trillion effect on the nation’s economy: housing.
Speaking directly to Congress, President Obama said, “And since the most important investment many families make is their home, send me legislation that protects taxpayers from footing the bill for a housing crisis ever again, and keeps the dream of homeownership alive for future generations.”
Those few words spoke to an enormous volume of real-life concerns that remain unresolved for many Americans. From access to mortgage credit, to delinquencies and continuing foreclosures, research data reminds us that the economic recovery is just not happening for everyone.
According to the Federal Reserve’s 2012 Home Mortgage Disclosure Act (HMDA) data:
- Total conventional home purchase loans totaled 1.7 million loans but Latinos received only 82,400 of those loans and African-Americans 38,702.
- Refinanced loans totaled 6.6 million loans but only 293,386 and 222,681 refinance loans went to Latinos and African-Americans respectively.
- 73 percent of mortgage loans originated in 2012 went to Whites while Latinos received only 4.9 percent and African-Americans received 2.3 percent.
More recently, a just-released report by CoreLogic, a leading source for property analysis and information, recapped 2013 housing activities and found that:
- Since 2008, 4.8 million foreclosures were completed as of December last year;
- The states with the highest number of these foreclosures were Florida, Michigan, California, Texas and Georgia; and
- Serious mortgage delinquencies, i.e. loans 90 days or more in arrears, were highest in four metro areas: Tampa-St. Pete, Orlando, Chicago, and Atlanta. In each of these metros, the percent of homes in serious delinquency surpassed that of the national average. Both Tampa and Orlando delinquencies more than doubled the national average of 5 percent to 12 and 11 percent, respectively.
If and when lawmakers begin to craft housing reforms, researchers and consumer advocates both believe that new approaches should fix what is broken and build upon what is working.
Nikitra Bailey, executive vice-president with the Center for Responsible Lending (CRL), observed, “We must work to ensure access to responsible mortgage credit for all credit-worthy borrowers. Now is the time to preserve access to credit for low wealth families, people of color and rural communities. With equal determination, we must also preserve the 30-year, fixed rate mortgage loan. Most importantly, we must allow the marketplace – not Congress – to set down payment requirements.”
Earlier, CRL research found that risky mortgage terms, not low down payments were the cause of the housing crisis. Researchers with the University of North Carolina (UNC) Center for Community Capital would agree. A new paper co-authored by Janneke Ratcliffe, the UNC Center’s executive director and Adam Levitin, a law professor at Georgetown University Law Center reached a similar conclusion.
The authors wrote, “During the mid-2000s, lending disparities shifted to credit terms with minority and lower-income borrowers more likely to receive loans with disadvantageous terms. Post-Recession, these borrowers again face a tight credit market that disproportionately locks them out. At the same time, massive demographic shifts mean that future housing demand lies increasingly in the hands of the very borrowers traditionally excluded from the market.”
Looking to the future of housing, CRL also calls for key, basic principles to provide workable solutions:
- Enable small lending institutions the opportunity to fairly compete with larger ones;
- Allow compensating factors in underwriting;
- Prohibit structured securities from accessing the government’s reinsurance; and
- Mutual ownership structure.
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.email@example.com.