More Low-Income, Minority Credit Shortages Ahead

In recent years data have shown the legacy of the housing crisis was disproportionately negative on low-income and minority homeowners. New findings indicate another crisis in the making for these buyers.

A report from the Harvard Joint Center for Housing Studies suggests changes to the housing finance system may negatively affect future lending to lower-income and minority borrowers and communities.

Because low-income and minority communities “were among the hardest hit by the mortgage market meltdown,” argued William Apgar, senior scholar at JCHS, former FHA commissioner and primary author of the report, “these same households and neighborhoods may not fully benefit from the emerging housing recovery.”

Harvard’s “Getting On the Right Track: Improving Low-Income and Minority Access to Mortgage Credit After the Housing Bust” report notes new policies and programs will be needed to promote affordable and sustainable homeownership opportunities over time, which is neither easy nor quick to achieve.

Apgar called on policymakers who “have failed to address longstanding issues, including persistent racial and ethnic discrimination and growing inequality in the distribution of income and wealth” to use their legislative power to help create a more responsible mortgage market.

The report also suggests “developing liquidity that provides broad access to mortgage credit that borrowers understand and have the ability to repay,” but not through more government intervention.

On the contrary, analysts write, it can be achieved by “reducing the government’s outsized presence and encouraging the return of private mortgage capital” that meets local market needs and implements non-discriminatory lending practices.

According to Eric Belsky, managing director of JCHS, the problem at hand is twofold. It will take time both for mortgage banks to ease their credit access requirements, which currently is almost unavailable, and for the industry “to reform all aspects of the housing finance system that need it.”

He sees as a positive that at least “the path forward is coming into view.”