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PRESS RELEASE CONTACT: Rebecca Storo: (617) 495-4356 March 9, 2004 Harvard
Study Finds That Unequal Access to Home Mortgages Washington, DC – Lacking the skills and information needed to shop for the best mortgage products available in the marketplace, many low-income and low-wealth homebuyers and mortgage borrowers are saddled with high-cost mortgage debt. In a briefing held at the offices of the Board of Governors of the Federal Reserve today, the Joint Center for Housing Studies released its comprehensive assessment of the challenges faced by community based organizations (CBOs) – and their public, private, and philanthropic partners – in expanding access to capital in low-income and low-wealth communities. The eighteen-month study entitled, “Credit, Capital, and Communities: The Implications of the Changing Mortgage Banking Industry for Community Based Organizations,” was funded by the Ford Foundation. “New computer and telecommunications technologies have spawned a revolution in mortgage finance that has enabled millions of low-income and low-wealth families to obtain home mortgages on favorable terms,” explains Nicolas P. Retsinas, Director of the Joint Center. “Yet at the same time, the mortgage broker-led ‘push marketing’ of low-downpayment, high-cost mortgages has left some unsuspecting borrowers with mortgage debt they cannot afford and may not even need.” Principal
findings include: • While legitimate risk factors contribute to the relatively low shares of prime conventional loans going to African-American and Hispanic borrowers and neighborhoods, race continues to be an important factor in determining the allocation of prime mortgage credit. • Even in areas with rapid home price appreciation over the decade of the 90s, the share of higher-income African Americans with conventional prime loans trailed that of white borrowers by 20 percentage points. • Community loan programs face stiff competition from aggressively marketed, higher-cost subprime mortgage products with fast turnaround times. •
The growth of higher risk subprime lending has produced a substantial
increase in foreclosures in low-income and/or minority communities. The report documents the changes in industry structure, the rise in higher-cost subprime lending, and the existence of a dual market structure. In particular, the report outlines a “home mortgage pricing guide” and a “buyer’s broker” network that would help low-income and low-wealth borrowers secure the best mortgage products available for their income and credit history. “Today,” notes study co-author William Apgar, “the lack of effective regulatory oversight, along with the lack of readily available mortgage pricing data results in a mortgage delivery system in which some borrowers pay more for mortgage credit and/or receive less favorable treatment than other similarly situated and equally credit worthy borrowers.” “CBOs
must rethink their efforts to help borrowers evaluate and resist
the misleading pitches of push marketers, and redouble their efforts
to pressure Harvard’s Joint Center for Housing Studies is the nation’s leading center for information and research on housing in the United States. Established in 1959, the Joint Center is a collaborative unit affiliated with the Harvard Design School and the Kennedy School of Government. The Director of the Joint Center for Housing Studies is Nicolas P. Retsinas, who was appointed in 1998. The Center’s research and additional information about its programs and activities are available at www.jchs.harvard.edu. -END- For
more information about the Joint Center and its programs, |