When Multicultural Homeownership is Done Right

by Gonzales Group

There is growing empirical evidence that despite the worst housing crisis since the Great Depression, lower-income homeowners are benefiting from well-designed affordable homeownership programs.

As highlighted in the report by David M. Abromowitz and Janneke Ratcliffe “Homeownership Done Right”, there is a compelling case for the many affordable housing programs that are working as intended. Here are a few of the examples sited in the report:

• 2009 examination of the foreclosure experiences of five city-based affordable homeownership programs in Boston, Chicago, Los Angeles, New York, and San Francisco found that out of nearly 9,000 low-income families who turned to these programs to purchase their homes, the overall default rate was below 1 percent. All of these lending programs boasted default rates below the average for their cities.
• A recent report on New York City’s affordable homeownership program showed only 13 foreclosures out of more than 20,000 homes sold to low-income buyers since 2004.
• University of North Carolina Center for Community Capital in a recent study compared the performance of home loans in a large, national portfolio of 36 lenders’ prime-rate mortgages offered to lower-income and minority borrowers, to that of subprime home loans in a mortgage industry database that covers about two-thirds of the market. Their analysis of borrowers with similar profiles (such as comparable lending risk factors, the size of down payments, and local property market conditions) shows that the borrowers who obtained subprime loans were three to five times as likely to default as their counterparts who had received the prime, affordable mortgages.

According the report, these impressive mortgage payment records by working-class families at the lower end of the income spectrum, mostly first-time homebuyers, have adhered to established home lending fundamentals:

• Fixed-rate, fully amortizing loan terms over 30 years
• Full documentation of income and demonstrated ability to pay the mortgage
• Escrows of taxes and insurance to ensure regular payment

Another finding from the report is the positive impact of home buying and education counseling with the borrowers who have obtained these affordable loan programs.

If you're interested in reading more on this report, visit:

http://www.americanprogress.org/issues/2010/04/homeownership_right.html