Making the Mortgage Market Work for America’s Families

7/28/2019 Making the Mortgage Market Work for Americas Families

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Making the Mortgage Market

Work for Americas FamiliesPresented by the Center for American Progress and the National Council of La Raza June 5,


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Making the Mortgage MarketWork for Americas Families

Presented by the Center for American Progress and the National Council of La Raza

June 5, 2013


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1 Acknowledgements

2 Introduction and summary

5 The need for increased access to affordable

homeownership

13 The secondary mortgage markets role

in supporting access and affordability

16 Rental housings connection to the

secondary mortgage market

19 The Market Access Fund

23 Strategic plans and evaluation

27 Conclusion

28 Endnotes

Contents


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1 Ceter r America Prgress ad natial Ccil La Raza | Makig te Mrtgage Market Wrk r Americas Families

Tis repor was he produc o a unique, year-long collaboraion among he broad range o

civil-righs and housing organizaions lised below:

Members o hese organizaions paricipaed in an exensive series o discussions o

develop and rene he ideas presened here.

We would like o hank he primary draers or heir hard work and research:

We also would like o hank Loren Berlin or her houghul ediing and advice, as well

as boh Te Opporuniy Agenda and he Morgage Finance Working Group (a group ohousing-nance expers convened by he Cener or American Progress), whose sa and

members provided invaluable eedback and suppor.

Las bu no leas, we would like o hank he Ford Foundaion and Open Sociey

Foundaions or making his collaboraion and repor possible.

Janis BowdlerDirecor o Economic Policy, Naional Council o La aza

Julia Gordon

Direcor o Housing Finance and Policy, Cener or American Progress

Acknowledgements

Cener or esponsible Lending Consumer Federaion o America

Enerprise Communiy Parners Te Greenlining Insiue Kirwan Insiue or he Sudy o ace

and Ehniciy Te Leadership Conerence on Civil

and Human ighs NAACP Naional Coaliion or Asian Pacic

American Communiy Developmen

Naional Communiy einvesmenCoaliion

Naional Fair Housing Alliance Naional Housing Conerence Naional Housing esource Cener Naional Housing rus Naional Urban League Te Opporuniy Agenda Povery & ace esearch Acion

Council einvesmen Parners

Jos Garcia, ormer Policy Fellow,

Naional Council o La aza Ehan Handelman, Vice Presiden or

Policy and Advocacy, Naional Housing

Conerence Janneke aclie, Execuive Direcor

o he UNC Cener or CommuniyCapial and Senior Fellow a he Cener

or American Progress

Chrisy ogers, Direcor o Oureach,

Kirwan Insiue or he Sudy o ace

and Ehniciy Ellen Seidman, Senior Fellow, Urban

Insiue Josh Silver, Vice Presiden o esearch

and Policy, Naional Communiyeinvesmen Coaliion


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Introduction and summary

Americas housing-nance sysem sands a a crossroads. We can resrucure he

morgage-nance sysem o resore balance o he housing marke and provide

credi o a broad and diverse populaion, or we can live wih a sysem in which

credi and housing choices are more cosly, more limied, and less susainable,

especially or minoriy and low- and moderae-income households. Te choice we

make will deermine no only he susainabiliy o a robus housing marke, bu

also uure economic opporuniies or millions o amilies.

In 2008 our nancial sysem ailed specacularly; axpayers bailed i ou, bu a

grea cos. Going orward, some measure o coninued governmen suppor or

morgages as well as or banks and oher nancial insiuions seems exremely

likely, eiher in he orm o an explici guaranee or anoher bailou i he sysem

ails again. In reurn or backsopping he morgage marke and nancial insiu-

ions, axpayers deserve a marke ha serves he long-erm ineress o amilies

and he economy as a whole.

Mos people hink o morgage lenders as he poin o inersecion wih he public.

However, he less ransparen bu very large secondary morgage markewhich

buys morgages, packages hem ino securiies, and sells hem o invesorsplays

a criical role in ensuring access and aordabiliy wihin he housing-nance

sysem. Lenders preer o make he ypes o morgage loans ha he secondary

marke will buy. For his reason, one o he mos eecive ways o ensure a broad,

accessible, and aordable primary morgage marke is by creaing a secondary

marke ha promoes hese same principles.

Using a range o possible ools, he secondary marke can encourage lenders o

provide all Americans access o sae, aordable morgages, including radiionallyunderserved populaions such as Hispanics, Arican Americans, rural residens,

low- and moderae-income amilies, Asians, Baby Boomers, and Echo Boomers. I

can also help increase access and aordabiliy by supporing sandardizaion and

lowered coss and by adoping responsible, argeed produc innovaions ha can

be made widely available hroughou he morgage marke.


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Secion 1 o his repor, Te need or increased access o aordable homeowner-

ship, discusses he imporance o homeownership and he housing nance sysem

o srong amilies, neighborhoods, and he overall economy. Te Unied Saes has

a long hisory o unequal access o susainable, aordable morgages, paricularly

or minoriy and low- and moderae-income communiies. Lack o equal access o

morgage credi can be explained by a variey o acors, including no only radi-ional discriminaion bu also he ailure o morgage lenders o serve geographies

and populaions ha hey may see as less lucraive (known as marke creaming).

Tis dierence in access o credi conribues o he naions unprecedened wealh

gap despie governmen eors o improve access. For his reason, i is criical o

redesign he sysem o accoun or shiing demographics and changing consumer

proles, including he rapid growh o communiies o color, decreased economic

securiy, and increasing demand among rural Americans.

Secion 2, Te secondary morgage markes role in supporing access and aord-

abiliy, reviews he secondary morgage markes abiliy o inuence he primarymarke and improve access o morgage credi or a broader populaion o poen-

ial homeowners. Te secondary markes willingness o purchase selec loan prod-

ucs, as well as is policies regarding pricing, underwriing, documenaion, capial

reserves, and repurchases, can eiher encourage he primary marke o or discour-

age i rom exending credi o underserved populaions. Leveraging his inuence

o improve access will no only increase opporuniies or aordable homeowner-

ship bu also creae new business opporuniies or he primary marke.

Secion 3, enal housings connecion o he secondary morgage marke,

discusses he role o he secondary marke in ensuring adequae nancing or he

developmen o aordable renal housing. Te governmen-sponsored enerprises,

or GSEs, and he Federal Housing Adminisraion have a long hisory o sup-

poring he principles o access and aordabiliy in he renal-housing conex. In

ac, during he 2008 nancial crisis, when privae capial rereaed naionwide,

governmen-suppored channels, especially he GSEs, were virually he only

sources o capial or nancing any renal housing a all. For his reason, proposals

regarding he uure o housing nance mus include consideraion o muliamily

nance as well as single-amily nance.

Secion 4, Te Marke Access Fund, oulines he imporance o promoing sae

produc innovaion as a way o increase access. Many poenial homeowners who

were once hough o be unaccepable risks because o low wealh, unconvenional

employmen, or lack o radiional credi have been successully served by he


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housing-nance sysem hrough careul underwriing and argeed lending pro-

grams ha use limied amouns o credi enhancemen. We recommend esablish-

ing a Marke Access Fund o suppor he ype o innovaions ha have proved so

successul in he pas and, when appropriae, bring o scale new lending producs

and services bes suied o he needs o hese borrowers.

Secion 5, Sraegic plans and evaluaion, deails he need or eecive oversigh

o he secondary marke o ensure ha he public benes o a axpayer-backed

sysem are widely available. Te marke regulaor(s), or example, can increase

access o aordable, susainable credi by ideni ying marke gaps, elevaing

promising producs, and haling predaory or discriminaory aciviy. We ouline

one possible sraegy or robus regulaion ha relies on marke analyses, sraegic

plans, and public inpu o monior perormance o secondary marke eniies,

boh broadly and in regard o reaching underserved markes.

In shor, we believe i is possible o design a housing-nance sysem ha eecivelymees Americas housing needs, as long as we are inenional and houghul abou

doing so. By supporing hese core values o access and aordabiliy, he housing-

nance sysem can help provide access o credi, enable amilies o build wealh,

build srong neighborhoods, and suppor boh he local and naional economy.


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The need for increased access

to affordable homeownership

Government support for homeownership:

Crucial but not equally distributed

For generaions, aordable homeownership has provided a primary means

or amilies o climb he economic ladder and achieve nancial sabiliy.

Homeownership resuls in a hos o posiive exernaliies boh or amilies and

or heir neighborhoods, ranging rom beter healh and educaion oucomes o

saer srees and more small-business developmen.1 Whas more, in addiion oproviding sheler, sabiliy, and a means o build asses, a broad, robus housing

marke is one o he mos powerul ools o boos he naional economy.

In recogniion o his vial public good, he governmen suppors homeowner-

ship hrough ederal morgage insurance and guaranee programs, including

hose o he Federal Housing Adminisraion, or FHA; he U.S. Deparmen

o Veerans Aairs, or VA; he U.S. Deparmen o Agriculure, or USDA; and

he governmen-sponsored enerprises, or GSEs. Te governmen has urher

encouraged homeownership hrough he morgage ineres deducion and

capial-gains ax exclusions.

Te governmen chooses o inves billions o ederal dollars ino homeowner-

ship because sae, aordable housing provides securiy o individual amilies and

srenghens communiies. For many Americans, especially hose wih limied

opporuniies o esablish a nancial oundaion, homeownership is a pah o

achieve more economic sabiliy. Homeownership can buer a amily agains

rising housing coss and help preven povery aer reiremen.2 Addiionally, a

robus housing indusry helps uel naional economic prosperiy boh as an asse-

building sraegy and by creaing jobs.

Unorunaely, some o he governmen programs, such as he morgage iner-

es deducion, disproporionaely help hose who leas need i. Seveny-seven

percen o he morgage ineres deducions claimed in 2012, or example, were


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by homeowners wih annual incomes greaer

han $100,000, while many lower- and middle-

income amilies ailed o receive any benes

rom he deducion.3

Anoher imporan lesson rom he run-up ohe housing-marke collapse in 2007 is ha

crediworhy borrowers oen have difculy

obaining a high-qualiy morgage. In some

cases, borrowers ound hemselves in credi

desers ha le hem wih ew opions beyond

subprime lenders selling high-risk loans. In

oher cases, borrowers were oered ample bu

dangerous credi, becoming he arge o aggres-

sive sales acics aimed a minoriy, emale,

rural, and elderly homeowners.

Compounding his dispariy, he naions

hisory o discriminaion and segregaion

has also limied access o credi or minori-

ies. As Tomas Shapiro, direcor o Brandeis

Universiys Insiue on Asses and Social

Policy, wries:

Residenial segregaion by governmen design has a long legacy in his counry

and underpins many o he challenges Aican-American amilies ace in buy-

ing homes and increasing equiy or many years, redlining , discriminaory

morgage-lending, lack o access o credi, and lower incomes have blocked he

homeownership pah or Aican-Americans while creaing and reinorcing com-

muniies segregaed by race.4

While Congress has repeaedly ried o eliminae hese praciceshrough he Fair

Housing Ac o 1968, he Equal Credi Opporuniy Ac o 1974, and he Federal

Housing Enerprises Financial Saey and Soundness Ac o 1992, among ohers

minoriies coninue o have rouble accessing sae and susainable morgage credi.

acial discriminaion was paricularly rampan in he subprime lending ha

ook place during he run-up o he housing crisis.5 Lenders oered incenives

o loan originaors o seer cerain borrowers or communiies o higher-cos

producs, such as he yield-spread premiums ha paid originaors more o place

The majority of government spending on housing

benefits higher-income Americans

0

20

40

60

80

100

Household

Annual Income

$200,000over

$100,000200,0

$75,000100,00

$50,00075,000

$40,00050,000

$30,00040,000

$20,00030,000

$10,00020,000

Below $10,000

24%

33%

6%

1%

11%

8%

1%

3%

12%

Source: Center on Budget and Policy Priorities analysis of 2010 Joint Committee on Taxation andHousing and Urban Development data


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borrowers in higher-cos or riskier morgages han hose or which hey qualied.6

Addiionally, dieren communiies or borrowers have generally been served by

dieren nancial insiuions such as subprime lenders.7

As a resul, low-income and minoriy amilies boh ace higher coss o borrow-

ing and are more likely o be denied loans. During he subprime lending boom,or example, Arican Americans wih good credi scores were 3.5 imes as likely as

whies wih good credi scores o receive higher-ineres-rae loans, and Lainos

were 3.1 imes as likely; in boh cases, abou 20 percen o high-FICO, minoriy

borrowers received high-ineres-rae loans.8 Similarly, he Federal eserve has

shown ha in 2009 Arican Americans were wice as likely o be denied a loan,

even aer conrolling or income and oher

borrower-relaed eaures.9

Consequenly, while he 2012 homeownership

rae or whies was 73.6 percen, Hispanic andArican American homeownership raes were

46.5 percen and 44.1 percen, respecively.10

Tese dispariies in homeownership signicanly

conribue o he dramaic wealh dispariies

beween whies and minoriies. A recen sudy by

he Urban Insiue revealed he dramaic exen

o his wealh gap: In 2010 he average whie

amily had six imes as much wealh ($632,000)

as he average black amily ($98,000) or

Hispanic amily ($110,000). Te repor argued

ha lower homeownership raes and alling

home prices were key drivers o his gap.11

Preparing for the homeowner of the future:

Demographic and economic change

America is changing. As we redesign he housing-nance sysem, we mus be

mindul o a new era o changing demographics, shiing consumer proles andpreerences, and new producs and regulaory oversigh.

Communiies o color are growing aser han heir whie counerpars, indica-

ing ha hese amilies will drive housing demand in he uure. According o he

U.S. Census Bureau, hal o he people living in America who are under he age

There are significant racial disparities

in homeownership

Differences between homeownership rate

and average homeownership rate, by race

Source: U.S. Census Bureau, 2012 data

+8.1%

-21.5%

-19.3%

-8.8%

White(non-hispanic)

65.4%(average)

Black(non-hispanic)

Hispanic(any race)

Asian


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o 1 are people o color, and by 2042 minoriies will be in he majoriy.12 Already

Hawaii, Caliornia, New Mexico, exas, and he Disric o Columbia are majoriy

minoriy.13 Te Join Cener or Housing Sudies o Harvard Universiy projecs

ha communiies o color will accoun or more han 70 percen o ne household

growh beween 2010 and 2020.14 Given he relaively low raes o homeowner-

ship among communiies o color, his demographic shi creaes remendousopporuniy or lenders o expand ino new markes.

Fuure borrowers are also more likely o be less economically secure. Tey will

include he 62 million Millennials as well as he millions o American amilies

dealing wih increased income sagnaion and job insecuriy. In 2010 median

American household income adjused or inaion was $49,445, roughly he same

as in 1989.15

Fuure borrowers will also increasingly be low-wealh borrowers. As a resul, he

size o he down paymen required o obain a morgage will be a crucial issue.Large down paymens are a signican barrier o homeownership: Even wih a 10

percen down-paymen requiremen, i would ake 20 years or he average amily

o save or a down paymen plus closing coss.16

Years to save to 10 percent down payment and closing costs

0

5

10

15

20

25

30

35

22

18

15

11

31

26

20

Fireghter($47,720)

Middle schoolteacher

($55,780)

Registerednurse

($69,110)

Veterinarian($91,250)

AfricanAmerican($33,578)

Latino($40,165)

White($54,168

Source: Center for Responsible Lending


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Addiionally, more uure homeowners will come rom he 109 million Americans

living in rural areas. ural Americans consiue 34 percen o he U.S. populaion,

and alhough homeownership raes are higher in rural and small-own com-

muniies han he naional average, residens sill have ew choices or accessing

morgage credi. In 2010 approximaely 3.8 percen o all home-purchase origi-

naions in he Unied Saes were classied as high-cos loans.17

In rural areas,approximaely 8.7 percen o all home-purchase originaions were high-cos loans,

accouning or 35.7 percen o such loans naionwide.18

Te naions housing-nance sysem needs o serve all o hese populaions.

Failing o do so would shrink he marke and rob millions o Americans o he

opporuniy o increase heir nancial sabiliy hrough homeownership. While

hese poenial cusomers presen some challenges, hey also represen remen-

dous opporuniies or lenders who are able o expand ino new markesand

hreaen o make irrelevan hose who can.

The (surpr is ing) risk profile of underser ved borrowers

Ineviably, among hese populaions here are many, many people wih he capac-

iy o be successul homeowners. Ta hese poenial borrowers are unable o

access aordable, susainable morgages indicaes ha here is a problem wih he

curren housing-nance sysem.

esearch indicaes ha low- and moderae-income borrowers and oher under-

served populaions someimes considered oo risky o nance can be high-per-

orming cusomers when placed in susainable, aordable morgages. Te UNC

Cener or Communiy Capial has analyzed more han 10 years o daa on a

porolio o 46,000 loans o low-income homeowners wih a median household

income o $30,792, more han hal o whom had a credi score less han or equal

o 680 a originaion. Seveny-wo percen o hese borrowers made a down pay-

men o less han 5 percen, wih a median loan balance o $79,000 a originaion.

esearchers concluded he ollowing in 2012:

Despie he osensibly risky prole o [he] borrowers and he urmoil aced by

housing markes since 2008, [he] porolio has perormed well, wih a serious

delinquency rae jus 60 percen ha o prime adjusable-rae morgages, less

han hal ha o subprime xed-rae morgages and a quarer ha o subprime

adjusable-rae morgages.19


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Te researchers credi he homeowners successes no only o personal deermina-

ion bu also o he morgage produc isel:

Te lenders involved helped hese nonradiional ye crediworhy borrowers buy

homes hey could aford wih morgages hey could manage: long-erm, xed-

rae, sel-amorizing morgages underwriten or he abiliy o repay.20

Whas more, his research also demonsraes he viabiliy and proabiliy o

low-down-paymen lending when borrowers are given access o sae, susainable

morgages.

Te sory o supposedly risky borrowers succeeding in susainable morgages

exiss hroughou he counry. NeighborWorks America repored in 2007 ha

o he nearly 3,000 home loans i unded o borrowers averaging only wo-hirds

o he naional median income and ting he prole o subprime borrowers, he

delinquency rae was only 3.34 percen. Tis was jus a bi above he naionalprime delinquency rae o 2.63 percen or he same period and vasly below he

nearly 15 percen subprime deaul raes prevailing a ha ime.21 NeighborWorks

America considered he xed-rae, aordable morgage one o he key drivers o

he homeowners successes.

A similar sory can be ound in he SoSecond program oered by an alliance

o organizaions in Massachusets. In his program, low- and moderae-income

borrowers receive wo loans o pay or heir homehe rs being a ully amor-

izing, xed-rae, 30-morgage, and he second being a so loan ha requires

only ineres paymens or he rs 10 years, hereby keeping borrowers coss

down while hey build equiy. Borrowers also receive prepurchase counseling

and mus provide a 3 percen down paymen. In is wo decades o exisence, he

SoSecond program has helped 15,000 borrowers10 percen o 20 percen o

eligible households saewidebuy heir rs homes, and i has done so wihou

increasing he risk o deaul: SecondSo loans have a serious delinquency rae

below ha o prime loans in Massachusets, and as o scal year 2010, he program

had a deaul rae o jus 3.4 percen since is incepion.22

Te evidence shows ha nonradiional borrowers can succeed as homeown-ers when provided access o air, aordable credi and ha lenders can originae

susainable morgages while mainaining responsible, proable lending sandards.


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Serving the lowest-hanging fruit: The problem of market creaming

Along wih discriminaion, anoher obsacle o increasing access o aordable

homeownership is marke creaming. Marke creaming reers o he primary

markes endency o preerenially serve hose perceived o be he easies,

mos lucraive, or leas risky borrowershe so-called cream o he cropa heexpense o borrowers who are equally able o susain homeownership bu require

more cusomizaion and consideraion due o nonradiional amily srucures,

employmen, or credi hisories; purchase smaller homes; or live in inconvenien

locaions. Le o is own devices, he marke will end o deliver he bes loans

where i is easies o do so and o channel higher-cos loans where borrowers are

easier o exploi and have ewer opions.

During he housing boom o he early o mid-2000s, creaming was less o a

concern as he primary marke raced o saisy invesors seemingly insaiable

appeies or loans by loosening underwriing sandards and expanding ino radi-ionally underserved markes, including minoriy, rural, and low- and moderae-

income communiies. Many lenders exploied hese populaions hisoric lack

o access by oering expensive, subprime producs ha were unsusainable in

he long erm. Lenders made money regardless o he borrowers abiliy o repay

because hey sold he loans ino he secondary marke immediaely. As a resul,

lenders had no incenive o be more cauious in underwriing he loans, and pred-

aory pricing acics allowed originaors o reap handsome pros rom all loans.

oday, however, lending is aking place in he conex o he Dodd-Frank Ac,

which mandaes igher underwriing sandards, limis cerain kinds o lender-paid

compensaion o originaors, and caps oal poins and ees ha can be charged

or saer loans. Whas more, burned by a large volume o secondary marke

repurchase requess, lenders have ighened underwriing sandards even beyond

wha is required by law. Lenders are now requiring higher credi scores, larger

down paymens, lower deb-o-income raios, and essenially reusing o lend

in cerain geographies, regardless o a poenial homeowners crediworhiness.

Sympomaic o his rend, beween 2007 and 2012 originaions o prime home-

purchase morgages ell 30 percen or borrowers wih credi scores above 780 bu

ell 90 percen or borrowers wih credi scores beween 620 and 680.23

As a resul,he marke is largely serving he mos prisine borrowers, hose seeking higher bal-

ance loans, and hose in well-served locaions. In oher words, hey are creaming.


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Te pendulum has swung oo ar he oher way, explained Federal eserve

Chairman Ben Bernanke in a November 2012 speech.24 According o Bernanke,

such overly igh lending sandards may now be prevening crediworhy borrow-

ers rom buying homes, hereby slowing he revival in housing and impeding he

economic recovery. Because here are currenly no incenives o loosen lending

sandards, however, lenders are unlikely o do so anyime soon.

Unless policymakers reshape he incenive srucure, he housing indusry is likely

o coninue o pursue he mos lucraive loans a he expense o sae, aordable

homeownership opporuniies or a wider specrum o borrowers.

A bipartisan consensus regarding the importance

of access to credit

We are no alone in calling or a housing-nance sysem ha is more accessibleo a wider range o people. Te Biparisan Policy Cener Housing Commission

recommended as much in is nal repor, Housing Americas Fuure: New

Direcions or Naional Policy, published in February 2013. Te auhors

conclude:

Te morgage nance sysem mus creae a sable, liquid marke ha nances

sae and afordable morgages or borrowers in all geographic markes hrough

complee economic cycles, wihou discriminaion, bias, or limiaions o access

ha are no based on sound underwriing and risk managemen.25

Addiionally, providing access o all crediworhy borrowers delivers on he social

compac inheren in he governmens suppor o he housing marke. Privae-

secor paricipans direcly bene rom he governmens involvemen hrough

risk managemen, sandardizaion, efciency, commodicaion, and capial. Tese

direc benes give rise o reciprocal social obligaions, including ensuring broad-

based access o he benes.


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The secondary mortgage

markets role in supporting

access and affordability

The influence of the secondar y market on the primar y market

Te secondary morgage marke plays an imporan and oen underesimaed role

in eiher limiing or promoing access o aordable, susainable credi or under-

served populaions. Secondary marke purchases inuence he primary markes

behavior via a selecive willingness o buy various morgage producs.

Beginning in he 1990s, or example, Fannie Mae and Freddie Mac, he GSEs,enabled primary marke lenders o serve low- and moderae-income borrowers

beter by pioneering aordabiliy programs such as he Communiy Home Buyers

Program, which boh esablished susainable producs and garnered credi under

he Communiy einvesmen Ac, or CR. More recenly invesors seemingly

endless appeie or privae morgage-backed securiies conribued signicanly

o he originaion o risky loans prior o he 2007 morgage-marke crash. In oher

words, or beter and or worse, he secondary marke can and does guide primary

marke acors ino new marke segmens by providing liquidiy o he marke.

As a resul, he secondary marke can be a powerul engine or innovaion. Unlike

individual lenders who have consrained resources and hus can amass suf-

cien experience o deermine scalabiliy, he secondary marke can quickly and

eecively pilo new conceps. Because dieren plans have dieren erms or he

eniies ha play he credi-risk-aking uncion currenly played by he GSEs, we

have creaed he erm Secondary Marke Eniies, or SMEs, as a cach-all caegory.

SMEs can ake innovaions emerging rom he primary marke and sandardize

hem o reach a larger marke. Tey can esablish produc guidelines, experi-

men wih nancing he produc, and in relaively shor order have enoughperormance daa rom a wide range o lenders o analyze viabiliy. Assuming he

produc proves scalable, SMEs can quickly esablish a new marke or he produc,

enabling lenders across he counry o originae i and, in urn, exend heir reach.


17/33


In his regard, he secondary marke is empowered o exer qualiy conrol over

he primary marke. Prior o he 2007 collapse o he housing marke, boh he

GSEs and privae-label eniies purchased adjusable-rae morgages. Loans

purchased by he GSEs were subjec o he GSEs sandards and have deauled a

one-hird he rae o he riskier adjusable-rae morgages, or AMs, securiized by

he privae-label securiies marke.

Similarly, he secondary marke heavily inuences he behavior o he primary

marke hrough pricing. Te GSEs impose higher ees on cerain loan ypes, or

insance, hus discouraging he primary marke rom originaing such loans.26

Consequenly, he marke or hose loans eiher shus down due o lack o liquid-

iy or moves o oher channels such as he Federal Housing Adminisraion.

Conversely, when GSEs lower heir ees or cerain ypes o loans, lenders origi-

nae more o ha produc.

Secondary markes policies regarding underwriing pracices, documenaion, risk-capial reserves, and repurchase requiremens urher inuence he behaviors o he

primary marke. Trough heir policies on hese issues, secondary marke eniies

can ensure credi is exended in a responsible way by well-capialized eniies.

The role of the secondar y market in increasing

access and affordability

Te secondary marke is in an ideal posiion o monior and counerac he

primary markes endency o serve a narrower slice o he marke by using ools

such as oureach, pricing, and counerpary managemen. In doing so, he second-

ary marke will no only increase access o aordable homeownership; i will also

exend he primary markes reachand business opporuniiesin cases where

he unique capabiliies o he secondary marke can direc unds o previously

underserved markes.

Equally imporan, he secondary marke can explicily afrm and uphold he

principles o air, equiable, and nondiscriminaory access o credi or consumers.

In addiion o complying wih he air housing and lending laws and regulaions,he secondary marke can use unding and oher mechanisms o reinorce he

primary markes compliance wih anidiscriminaion laws. SMEs also are ideally

posiioned o compile daa ha can be analyzed o deermine compliance.


18/33


o achieve he opimal balance beween access o credi and sae and susainable

lending, any secondary marke sysem should include mechanisms o urher wo

imporan and complemenary objecives: Firs, he sysem should have a way

o incubae and suppor innovaion around new producs or processes ha can

expand homeownership boh saely and proably. Second, he sysem should

discourage marke creaming and encourage lending o as broad a range o borrow-ers as possible across all populaions and geographies.

Upholding hese principles is no only he responsibiliy o he secondary marke

eniies bu also o heir regulaors, who should explore oher ways in which he

secondary marke can boh reduce discriminaion and afrmaively urher air

lending and housing. Te principles and raionale or access and aordabiliy

apply o he secondary morgage marke regardless o srucure.

Were he secondary marke o consis o a single agency acing as he predominan

risk guaranor, or example, perormance could be benchmarked agains he mar-ke as a whole, and he agency or is regulaor could se rules or providing access.

Alernaively, i muliple privae eniies were playing ha role, measuring and

managing he perormance o each eniy would likely be benchmarked agains

regional or oherwise-dened markes and dynamics, as well as he enire marke.

egardless o srucure, he business o he secondary marke mus be managed

o ensure saey and soundness and, in he case o privaely owned enerprises, o

generae a reasonable reurn.

In secions 4 and 5 o his repor, we propose mechanisms or accomplishing each

o hese objecives. We oer hese proposals as examples o how hese objecives

can easily and smoohly ino a secondary marke, regardless o srucure. Tere

may be oher, possibly even beter, approaches; however, by providing deails

around hese examples, we hope o clariy he principles we discussed earlier in

he repor and o inspire engagemen around hese objecives and resh ideas or

reaching hem.


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Rental housings connection to

the secondary mortgage market

Approximaely one-hird o Americans live in renal housing.27 Nearly 50 percen

o all low-income reners are minoriy households, and more han 50 percen o

exremely low-income reners are households o color.28

enal homes provide a saring place or new households, mobiliy or people

who move wih heir work, convenience o ransi, a ransiion or older aduls

who no longer need a large home, and aordable sheler or many Americans o

low and moderae income. enal housing is in urban, suburban, and rural com-muniies. As we resrucure he morgage-nance sysem, we mus ensure ha i

direcs capial o renal housing, paricularly housing ha is aordable o low- and

moderae-income households and is locaed in communiies wih access o good

schools, jobs, ransporaion, and oher ameniies.

Te cos o renal housing is an increasing burden, paricularly or people wih he

leas income. Te U.S. Deparmen o Housing and Urban Developmen, or HUD,

recenly repored ha he number o low-income rener households wih wors-

case needs increased o 8.48 million in 2011, up rom a previous high o 7.10 mil-

lion in 2009.29 Looking specically a working households, he Cener or Housing

Policy ound ha more han one in our rener households spen more han hal o

heir income on housing.30 In mos places, rens are rising aser han income.

enal housing needs access o capial o serve he many people who rely on i.

Consrucion o new renal properies only occurs i here is permanen morgage

capial available o nance i once consrucion is complee. In addiion, proper-

ies large and small need periodic renovaions, ypically every ve o seven years.

o preserve older aordable renal housing, developers oen need nancing

o acquire as well as renovae he properies. Te secondary morgage markeprovides a criical source o capial o nance all o his consrucion, acquisiion,

renovaion, and renancing.


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Te primary means ha he ederal governmen uses o ensure ha capial ows

o renal housing are he Federal Housing Adminisraion, or FHA, and he GSEs,

each o which has a division devoed o muliamily housing.31 During he 2008

nancial crisis, when privae capial rereaed naionwide, FHA and he GSEs were

virually he only sources o capial or nancing renal housing. Even as privae

capial has gradually reurned o he muliamily marke, i has mosly ocused onhe highes-end properies in he sronges urban and suburban markes, leaving

governmen channels o nance older, less-expensive properies and hose in sec-

ondary and eriary markes. As privae capial gradually broadens is risk exposure,

he recen crisis is a reminder ha only a governmen-suppored channel provides

he counercyclical capaciy o ensure seady access o capial or renal housing.

Perormance o he GSE muliamily divisions, in paricular, has been srong

hroughou he nancial crisis. Deaul raes or Fannie Mae and Freddie Mac mul-

iamily loans have remained well below 1 percen hroughou and since he nan-

cial crisis. Disciplined underwriing, a srong nework o originaors, and aciveasse managemen kep boh GSEs muliamily nance divisions proablear

dieren rom wha happened in he single-amily marke.32 Ta provides a srong

rack record on which o build as we consider opions or muliamily housing

nance reorm.

Tere are several proposals or housing-nance reorm ha specically ocus on

muliamily nance, virually all o which include an explici governmen back-

sop paid or by a ee.33 Whaever soluion emerges on he single-amily side likely

will drive he oucome or muliamily nance, simply because he single-amily

business is so much larger. I is essenial ha muliamily renal nance needs ge

explici atenion in housing-nance reorm so ha he evenual new sysem pre-

serves he srenghs ha have lased hrough he nancial crisis o nance aord-

able renal housing, which is key o ensuring ha vulnerable populaions coninue

o have access o housing.

Wih respec o access and aordabiliy, muliamily renal nance is a criical

mechanism by which he secondary morgage marke can promoe hese prin-

ciples. Fannie Mae and Freddie Mac or many years relied on heir muliamily

nance divisions o help mee heir aordable housing goals, in par because mul-iamily renal housing naurally addresses low- and moderae-income households

as well as households o color.


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Governmen should encourage whaever secondary marke eniies emerge o

devoe a porion o heir aciviies o renal housing, ideally wih an aim o crea-

ing proable, sel-susaining business lines ha nance aordable renal housing.

Aciviies o he Naional Housing rus Fund and Capial Magne Fund (dis-

cussed in Secion 4) are also imporan componens o he secondary marke, and

neiher should subsiue or he oher. Perormance in he muliamily nancearea would all under he periodic review by he regulaor (discussed in Secion 5).

Demand or renal housing coninues o rise aser han he incomes o hose who

live in i. For our housing-nance sysem o ruly serve all in America, i mus ensure

sable access o capial or he producion and preservaion o renal housing.


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The Market Access Fund

A tool for providing access

Over he pas 30 years, weve learned ha many poenial homeowners who

were once hough o be unaccepable risks because o low wealh, unconven-

ional employmen, or lack o radiional credi have been successully served by

he housing nance sysem hrough careul underwriing and argeed lending

programs ha address hese borrowers needs. Oen such programs grow ou o

small, scalable pilos ha use limied amouns o credi enhancemen.

Te producs ha are appropriae or hese prospecive homeowners and owners

o renal homes who are no easily served by privae markes demanding compei-

ive raes o reurn oen require some amoun o credi enhancemen, or risk

capial. Tese borrowers inhabi a gray zone beween ully privae credi and ully

insured credi hrough agencies such as he Federal Housing Adminisraion, he

Deparmen o Veerans Aairs, and USDAs ural Housing Services, or HS.

During heir mos eecive years, Fannie Mae and Freddie Mac generaed some o

his innovaion hrough heir own risk capial by relying on sandard, ully docu-

mened loans; on heir large marke shares; and on broadly priced credi producs,

using limied pilos or rused parners.

Banks subjec o he Communiy einvesmen Ac also do some o his on a lim-

ied scale, boh inernally and hrough suppor o mission-oriened inermediaries

such as Communiy Developmen Financial Insiuions, or CDFIs. Many o he

mos successul o hese programs bene rom eiher explici or implici suppor

rom he ederal governmen, including he FHA, he VA, HS, and he GSEs.

Because many proposals or a revamped housing nance sysem require he

majoriy o he morgage credi risk o be borne by privae capial, which is no

subjec o CR or he GSEs housing goals, he srucure o suppor his ype o

innovaion may no evolve organically. For his reason, we believe i is criical o

creae an explici capaciy or such aciviies regardless o uure srucure.


23/33


o his end, we propose esablishing a Marke Access Fund, or MAF, 34 o promoe

broader access o morgage credi and o suppor he ypes o innovaions ha

have proved so successul in he pas. Te MAF would be capialized hrough a

small assessmen (likely a racion o a cen per dollar) on all securiized mor-

gages, wheher or no an issue receives a ederal caasrophic guaranee. Tis assess-

men would have a negligible impac on he cos o an individual morgage bucollecively would generae a signican amoun o income. Tose monies would

be used o suppor he developmen and esing o innovaive, aordable producs

and services or approximaely 1 million o 2 million households annually.

In a housing nance sysem wihou Fannie Mae and Freddie Mac, a small ee on

all morgages in he secondary marke is an efcien subsiue or los GSE nanc-

ing and innovaion as well as replacing he assessmen ha was esablished by he

Housing and Economic ecovery Ac o 2008, or HER, o suppor aordable

housing hrough he Naional Housing rus Fund and he Capial Magne Fund.

Like servicing ees, he MAF ee could be easily colleced by he Securiies andExchange Commission on behal o he undor, i proposals or a single securii-

zaion plaorm are implemened, by he plaorm isel.

What would the Market Access Fund do?

Te MAF would serve our broad uncions:

1. Grans and loans

Provide grans and loans or research, developmen, and pilo esing o

innovaions in prepurchase preparaion, produc, underwriing, and servicing

ha expand he marke or susainable homeownership and or unsubsidized,

aordable renal. Examples35 o poenial producs ha could be developed and

esed wih his porion o he MAF include:

Use o innovaive auomaic underwriing sysems ha include such variables

as housing counseling or paricipaion in a savings program such as Individual

Developmen Accouns

Nonee ownership srucures such as communiy land russ and resriced

deed sales, which reduce he immediae enry price or homeownership while

reaining permanen aordabiliy


24/33


Low-down-paymen morgages ha require a porion o every morgage

paymen o be deposied ino a reserve savings accoun (beyond a sandard

escrow accoun) o provide a cushion or boh repair/mainenance and

economic sress

2. Credi enhancemen

Oer limied credi enhancemen and oher credi suppor or producs ha

increase susainable homeownership and aordable renal bu ha could no

oherwise be piloed a sufcien scale o deermine viabiliy in he privae

marke.

Financing or rehabiliaion and energy reros o small renal properies

where he operaing cos savings can requenly cover he cos o nancing

Biweekly paymen morgages ha resul in 13 monhly paymens each year,hus amorizing more quickly han a sandard monhly morgage

Susainable housing counseling models ha combine lender suppor, clien

ees, and limied governmen and philanhropic subsidies

3. Capial Magne Fund

Te MAF would also capialize he Capial Magne Fund, which enables CDFIs

and nonpro housing developers o atrac privae capial and ake aordable

housing and communiy-developmen aciviies o greaer scale and impac.

Te Capial Magne Fund was auhorized by Congress under HER and was

o have permanen, dedicaed nancing hrough a charge on Fannie Mae and

Freddie Mac. As a resul o Fannie and Freddie being pu ino conservaorship,

however, i has only received one round o appropriaed unding, in FY 2010.

Examples o successul projecs unded hrough he Capial Magne Fund are:

Preserving 206 unis o aordable housing hrough an unsecured loan ha

nanced land acquisiion wih credi enhancemen provided by Capial

Magne unds


25/33


Financing 67 muliamily renal unis on Skid ow in Los Angeles, Caliornia,

or exremely low-income individuals and 50 new unis o housing or seniors

in Shrevepor, Louisiana

Supporing he conversion o our manuacured housing parks rom inves-

or-owned o residen-owned communiies

4. Naional Housing rus Fund

Te MAF would also capialize he Naional Housing rus Fund, a HUD-

adminisered sae block-gran program designed primarily o increase and

preserve he supply o renal housing or exremely low-income amilies (under

30 percen o area median income) and very low-income amilies (under 50

percen o area median income). Saes can adminiser he unds hrough he

sae housing nance agency or housing deparmen or pass a porion on o

local governmens. Te rus Fund was auhorized by HER and was o havepermanen, dedicaed nancing hrough a charge on Fannie Mae and Freddie

Mac, bu due o he conservaorship, i has never received any unds.


26/33


Strategic plans and evaluation

In addiion o providing argeed unding o expand he range o borrowers served

by he housing-nance sysem, he sysem also needs a mechanism o ensure

agains marke creaming, he phenomenon ha we idenied in Secion 2 o

his repor. Tis mechanism can proacively suppor he ow o air and aord-

able credi by ideniying marke gaps, elevaing promising producs, and haling

predaory or discriminaory aciviy.

As is he case in our curren housing-nance srucure, here mus be a markeregulaor responsible or monioring he use o he axpayer guaranee, ensur-

ing ha he public bene is no abused or unairly raioned. Because i will have

a comprehensive view o he naional housing landscape, he secondary marke

regulaor will be in he bes posiion o ensure ha he benes o a axpayer-

unded guaranee are available o all qualied borrowers, regardless o he ulimae

srucure o he sysem. (Noe: I is possible ha here will be more han one regu-

laor involved in his sysem, bu or he sake o readabiliy, we reer in his secion

o a single regulaor.)

While he accounabiliy mechanism will need o adap o he new srucure o

he housing-nance sysem, his secion proposes one possible model or evalua-

ing perormance ha includes hree key componens: overall marke assessmens,

rigorous oversigh and evaluaion, and individualized sraegic plans.

Step 1: Conduct overall market assessment

A key componen o he sysem is or he regulaor o provide he public wih an

annual assessmen o he housing marke, including a needs analysis o ideniyprioriy and unme needs and o ideniy areas ha have gone underserved by he

marke as a whole. In recen years examples o pressing and unme needs have

included rural and manuacured housing, senior housingincluding aging-in-

place opions and aordable lie care cenersaordable renal housing, and he

homeownership gap beween whies and people o color.


27/33


Nex, he regulaor would assess he poenial causes o hese marke gaps and

oer insighs and recommendaions or closing hem, which migh include acions

such as counseling, beter oureach o borrowers or servicers, underwriing

reorms, or changes in repurchase agreemens.

Step 2: Oversee and evaluate SME performance

Using he marke assessmens and daa on primary and secondary marke aciviy,

he regulaor would evaluae he exen o which SMEs mee he housing needs

idenied by he marke analysis and comply wih air housing and oher relevan

laws. Such evaluaion would include using he Home Morgage Disclosure Ac,

or HMDA, and oher daa o compare SME perormance agains he primary

marke, heir peers, and demographic benchmarks. As par o he evaluaion, he

regulaor would solici public inpu on SMEs recen perormance.

Because each SME is likely o have a dieren ooprin and business sraegy,

he regulaor would adjus he evaluaions accordingly o accoun or an SMEs

specic siuaion. When reviewing an SMEs perormance, or example, i would

consider he presence o oher SMEs in ha marke, he exen o secondary

marke aciviy, he srucure o he primary marke, and economic condiions

ha would aec perormance. I would also ocus on regions or oher areas ha

appropriaely reec he SMEs size and he scale o is operaions.

For perormance measures involving low- and moderae-income borrowers,

income deniions would correspond o CR exams so ha SME and bank

perormance could be direcly compared and so ha he secondary marke would

suppor and be aligned wih primary marke access eors. Oher perormance

measures would include SMEs abiliy o reach underserved communiies as pre-

viously idenied by he regulaor.

In addiion o reviewing SMEs loan nancing, he regulaor would also consider

how eecively he SMEs assis borrowers o succeed as homeowners. I would

deermine i an SME is appropriaely deploying MAF money o suppor qualiy

counseling, assess innovaions in produc developmen and underwriing sup-pored by he Marke Access Fund, and evaluae SME loss-miigaion aciviies o

ensure programs are eecively assising borrowers o avoid oreclosure.


28/33


Addiionally, he regulaor would conduc a saey and soundness assessmen o

analyze he loans nanced by he SMEs o ensure ha he loans are aordable,

responsible, and susainable. I any signican segmen o he loans were signi-

canly underperorming indusrywide averages or were oherwise deermined o

be unsae or unsound, he regulaor would have he auhoriy o ake remedial

acions o address he problem.

Te regulaor would use he evaluaions o rae SME perormance.

Noncompliance wih anidiscriminaion or consumer-proecion laws would

negaively impac he raings.

Step 3: Build individualized strategic plans for each SME

Each SME would hen design a sraegic plan ha would ow a leas in par rom

he housing needs idenied in he regulaors marke assessmens. SMEs woulduse he sraegic planning process o ideniy specic prioriy housing and credi

needs ha hey inend o address, creaing opporuniies or he eniies o proac-

ively respond o unme marke needs.

Te SMEs could also sugges innovaive parnerships wih lending insiuions,

communiy organizaions, and public agencies. Tey could involve communiy

sakeholders in he planning process and subsequen aciviies boh o beter

undersand borrower needs and o esablish robus relaionships wih communiy

organizaions.

Addiionally, in response o marke analysis published by he regulaor and bench-

marks rom he regulaors evaluaions, SMEs would deail sraegies or address-

ing any idenied areas o weakness.

Te plan would be open or public inpu and subjec o regulaory approval.


29/33


Continuous cycle of assessment and improvement

Te coninuous cycle o marke assessmen, sraegic plans, and evaluaions would

creae a rigorous bu exible accounabiliy mechanism. I would promoe respon-

sible lending and increased borrower suppor services or aordable housing. I

could also iniiae a rigorous dialogue among SMEs, lenders, regulaory agencies,and he general public regarding how bes o address housing and credi needs

using objecive and evolving perormance measures. Tis susained dialogue is

missing in curren evaluaions o nancial insiuions and is imperaive o improv-

ing access o credi and capial or aordable housing.


30/33


Conclusion

Owning a home provides economic and social sabiliy or middle-class ami-

lies, builds wealh ha can be leveraged and ranserred across generaions, and

encourages residens o mainain heir properies and inves in heir communi-

ies. Aordable renal housing proecs amilies agains povery, gives hem more

resources o mee oher needs such as healh and child care, and can even provide

an opporuniy o save or a down paymen.

Te secondary marke plays a key role in ensuring access o credi boh or home-buyers and or providers o aordable renal housing. As we proceed wih our

naional conversaion abou how o reorm he secondary marke, we will spend

much ime discussing quesions o srucure, including he appropriae role o

privae capial, how o minimize risk o axpayers, and he uure o he 30-year

xed-rae morgage. Bu we mus also address quesions o access and aord-

abiliy. I we keep hese principles in mind, we can design a secondary marke

srucure ha reas everyone equally and suppors he ype o broad, accessible,

and aordable morgage marke ha will bes suppor American amilies and he

naional economy.


31/33


Endnotes

1 Craig Eva Pllack, Bet A Gri, ad Jlia Lyc,hsig Ardability ad healt Amg hmew-ers ad Reters, America Jral PrevetativeMedicie 39 (6) ( 2010): 515521, available at ttp://dwlad.jrals.elsevierealt.cm/pds/jr-als/0749-3797/PIIS0749379710004551.pd; Ricard K.Gree ad Micelle J. Wite, Measrig te Beefts hmewig: Eects Cildre, Jral urba

Ecmics 41 (1997): 441461, available at ttp://ec.csd.ed/~miwite/gw-je-reprit.pd; Jila ni adCristper Decker, Te Impact hmewersip Crimial Activity: Empirical Evidece rm uited StatesCty Level Data, Ecmics & Bsiess Jral:Iqiries & Perspectives 2 (1) (2009): 1737, availableat ttp://ecedweb.maa.ed/eba/jral/EBJI-P2009niDecker.pd; Mark E. Scweitzer ad Sctt A.Sae, Te Eect Fallig hme Prices Small Bsi-ess Brrwig (Clevelad, oh: Federal Reserve Bak Clevelad, 2010), available at ttp://www.cleveladed.rg/researc/cmmetary/2010/2010-18.cm.

2 Tdd Siai ad niclas S. Sleles, ower-occpiedhsig as a hedge Agaist Ret Risk , Te QarterlyJral Ecmics 120 (2) (2005): 763789, availableat ttp://qje.xrdjrals.rg/ctet/120/2/763.abstract; James M. Williams ad Timty M. Smeed-ig, Slidig it Pverty? Crss-natial Patters

Icme Srce Cage ad Icme Decay i oldAge. Wrkig Paper 2004-25 (Ceter r RetiremetResearc at Bst Cllege, 2004), available at ttp://crr.bc.ed/wrkig-papers/slidig-it-pverty-crss-atial-patters--icme-srce-cage-ad-icme-decay-i-ld-age/.

3 Wealtier mewers carry larger mrtgages adts ave mre iterest eligible r dedcti; teamt te eligible dedcti icreases i step wita selds margial tax rate; ad may lwer-t-middle icme mewers d t itemize teirdedctis. See Will Fiscer ad Cye-Cig hag,Mrtgage Iterest Dedcti Is Ripe r Rerm:Cversi t Tax Credit Cld Raise Revee adMake Sbsidy Mre Eective ad Fairer (Wasigt:Ceter Bdget ad Plicy Pririties, 2013), availableat ttp://www.cbpp.rg/cms/?a=view&id=3948.Temrtgage iterest dedcti als csts apprximately

$68.5 billi a year. See Bipartisa Plicy Ceter hs-ig Cmmissi, hsig Americas Ftre: new Direc-tis r natial Plicy (2013), available at ttp://bipartisaplicy.rg/library/reprt/sig-tre.

4 Tmas Sapir, Tatjaa Mescede, ad Sam osr,Te Rts te Wideig Racial Wealt Gap: Explai-ig te Black-Wite Ecmic Divide (Waltam, MA:Bradeis Istitte Assets ad Scial Plicy, 2013),available at ttp://iasp.bradeis.ed/pds/Atr/sapir-tmas-m/racialwealtgapbrie.pd.

5 Debbie Grestei Bcia ad ters, Lst Grd,2011: Disparities i Mrtgage Ledig ad Frecl-sres (Wasigt: Ceter r Respsible Ledig,2011), available at ttp://www.respsibleledig.rg/mrtgage-ledig/researc-aalysis/Lst-Grd-2011.pd.

6 Ceter r Respsible Ledig, Yield Spread Premims:A Pwerl Icetive r Eqity Tet (2004), available atttp://www.respsibleledig.rg/mrtgage-ledig/tls-resrces/ib011-YSP_Eqity_Tet-0604.pd .

7 Jacb. S. Rg ad Dglas S. Massey, RacialSegregati ad te America Freclsre Crisis,America Scilgical Review 75 (5) (2010): 629651,available at ttp://blgs.reters.cm/elix-salm/fles/2010/10/10ASR10_629-651_massey-2.pd; Cris-tia E. Weller, Access Deied: Lw-Icme ad Mir-ity Families Face Mre Credit Cstraits ad higerBrrwig Csts (Wasigt: Ceter r America

Prgress, 2007), available at ttp://www.america-prgress.rg/wp-ctet/plads/isses/2007/08/pd/credit_access.pd. I additi, te Departmet Jstice recetly aced settlemets wit twmajr facial istittisWells Farg ad Bak America/Ctrywidei wic te baks agreedt pay rgly $175 milli ad $335 milli, respec-tively, t reslve claims tat Arica America ad his-paic brrwers were placed i iger-cst las tatse r wic tey qalifed. See u.S. Departmet Jstice, Jstice Departmet R eaces Settlemet witWells Farg Resltig i Mre Ta $175 Milli iRelie r hmewers t Reslve Fair Ledig Claims,Press release, Jly 12, 2012, available at ttp://www.

jstice.gv/pa/pr/2012 /Jly/12-dag-869 .tml; u.S.Departmet Jstice, Jstice Departmet Reaces$335 Milli Settlemet t Reslve Allegatis Ledig Discrimiati by Ctrywide Fiacial Cr-prati, Press release, December 21, 2011, available

at ttp://www.jstice.gv/pa/pr/2011/December/11-ag-1694.tml.

8 Grestei Bcia ad ters, Lst Grd, 2011.

9 Rbert B. Avery ad ters, Te 2009 hMDA Data: TeMrtgage Market i a Time Lw Iterest Rates adEcmic Distress (Wasigt: Bard Gverrs te Federal Reserve System, 2010), available atttp://www.ederalreserve.gv/pbs/blleti/2010/articles/2009hMDA/dealt.tm.

10 u.S. Cess Brea, Residetial Vacacies ad hme-wersip i te Tird Qarter 2012, Press release,octber 30, 2012, available at ttp://www.cess.gv/sig/vs/fles/qtr312/q312press.pd.

11 Sige-Mary McKera ad ters, Less Ta Eqal:Racial Disparities i Wealt Accmlati (Wasig-

t: urba Istitte, 2013), available at ttp://www.rba.rg/pblicatis/412802.tml . See als RakesKcar, Ricard Fry, ad Pal Taylr, Wealt gapsrise t recrd igs betwee wites, blacks, hispaics:

Twety-t-e, (Wasigt: Pew Researc Ceter,2011), available at ttp://www.pewscialtreds.rg/2011/07/26/wealt-gaps-rise-t-recrd-igs-betwee-wites-blacks-ispaics/; Debbie GresteiBcia, Wei Li, ad Keit S. Erst, Freclsres by Racead Eticity: Te Demgrapics a Crisis (Dram,nC: Ceter r Respsible Ledig, 2010), availableat ttp://www.respsibleledig.rg/mrtgage-ledig/researc-aalysis/reclsres-by-race-ad-eticity.pd.

12 u.S. Cess Brea, Mst Cildre Yger Ta Age1 are Mirities, Cess Brea Reprts, Press release,May 17, 2012, available at ttp://www.cess.gv/ewsrm/releases/arcives/pplati/cb12-90.tml;

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13 u.S. Cess Brea, Mst Cildre Yger Ta Age 1are Mirities, Cess Brea Reprts.

14 Te Jit Ceter r hsig Stdies harvard ui-versity, Te State te natis hsig 2012 (2012),available at ttp://www.jcs.arvard.ed/sites/jcs.arvard.ed/fles/s2012.pd.

15 Atrs calclatis rm u.S. Cess Brea,hselds by Ttal Mey Icme, Race, ad hispaicorigi hselder: 1967 t 2010 (u.S. Departmet Cmmerce, 2011), available at ttp://www.cess.

gv/prd/2011pbs/p60-239.pd.

16 Ceter r Respsible Ledig, A Gvermet-Madated 10% Dw Paymet: Bad r Families, tehsig Market ad te Ecmy (2012), available atttp://www.respsibleledig.rg/mrtgage-led-ig/plicy-legislati/reglatrs/10-percet-dw-paymet-bad.pd.

17 At te time te 2010 hMDA data were cllected, ederalreglatis defed ig-cst mrtgages as laswit a iterest rate at least 1.5 percetage pits rfrst-lie las (3 percetage pits r secdary-lielas) iger ta te aal percetage rate ered prime mrtgage las cmparable type.

18 hsig Assistace Ccil Tablatis 2010 hmeMrtgage Disclsre Act data. See hsig AssistaceCcil, Takig Stck: Rral Peple, Pverty, ad hs-

ig i te 21st Cetry (2012), available at ttp://www.rralme.rg/cmpet/ctet/article/587-takig-stck-2010.

19 Allis Freema ad Jaeke Ratclie, Settig teRecrd Straigt hmewersip (Capel hill, nC:unC Ceter r Cmmity Capital, 2012), availableat ttp://www.ccc.c.ed/dcmets/SettigTeR-ecrdStraigtohmewersip.pd.

20 Ibid.

21 Gretce Mrges, Blame te Brrwers? ntS Fast, Te new Yrk Times, nvember 25, 2007,available at ttp://www.ytimes.cm/2007/11/25/bsiess/25gret.tml?pagewated=all.

22 unC Ceter r Cmmity Capital, MassacsettsStSecd La Prgram (2011), available at ttp://

www.ccc.c.ed/dcmets/Case.Stdy.Sstai.LIMtge.Led.MPP.5.12.pd.

23 Gv. Elizabet A. Dke, A View rm te FederalReserve Bard: Te Mrtgage Market ad hsig C-ditis, hsig Plicy Exective Ccil, Wasigt,D.C., May 9, 2013, available at ttp://www.ederalre-serve.gv/ewsevets/speec/dke20130509a.tm.

24 Be Berake, Calleges i hsig ad MrtgageMarkets, operati hoPE Glbal Fiacial DigitySmmit, Atlata, Gergia, nvember 15, 2012, availableat ttp://www.ederalreserve.gv/ewsevets/speec/berake20121115a.tm.

25 Bipartisa Plicy Ceter hsig Cmmissi, hsigAmericas Ftre.

26 Fr mre irmati, see Adam Rst, Te La Level

Pricig Adjstmets: A new hrdle t h mewersip(Dram, nC: Cmmity Reivestmet Assciati nrt Carlia, 2011), available at ttp://www.rei-vestmetparters.rg/sites/reivestmetparters.rg/fles/pd/Te%20new%20hrdle%20t%20hme%20owersip.pd.

27 Jit Ceter r hsig Stdies harvard uiversity,Americas Retal hsig: Meetig Calleges, Bild-ig opprtities (2011), available at ttp://www.jcs.arvard.ed/sites/jcs.arvard.ed/fles/americasret-alsig-2011.pd.

28 natial Lw Icme hsig Caliti tablatis te 2010 America Cmmity Srvey pblic semicrdata sample, available at ttp://ww w.cess.gv/acs/www/data_dcmetati/pblic_se_micr-data_sample/ (last accessed May 2013).

29 u.S. Departmet hsig ad urba Develpmet,Wrst Case hsig needs 2011: Reprt t Cgress(2013), available at ttp://www.dser.rg/Pblica-tis/pd/huD-506_WrstCase2011.pd.

30 Jaet Viveirs ad Maya Brea, hsig Ladscape2013 (Wasigt: Ceter r hsig Plicy, 2013),available at ttp://www.c.rg/media/fles/Lad-scape2013.pd.

31 Mltiamily hsig is distict rm retal s-ig, sice mltiamily bildigs ca be wed, adcdmiims ad sigle-amily mes ca be reted.Fiacig ew retal sig teds t cs mltiamily caels, wic leaves a capital gap rsmall-bildig ad sigle-amily retals.

32 Faie Mae, Aalysis te Viability Faie MaesMltiamily Bsiess operatig witt a Gver-

met Garatee: Respse t FhFA ScrecardDirective (2012), available at ttp://www.a.gv/webfles/25160/FnMMF2012ScrecardRespse.pd;Freddie Mac, Reprt t te Federal hsig FiaceAgecy: hsig Fiace Rerm i te MltiamilyMrtgage Market (2012), available at ttp://www.a.gv/webfles/25161/FREReprt_MF_MarketAalysis.pd; Eta hadelma, David A. Smit, ad Tdd

Trebek, Gvermet-Spsred Eterprisesad Mltiamily hsig Fiace: Recsig CreFctis (Wasigt ad Bst: natial hsigCerece ad RECAP Real Estate Advisrs, 2010),available at ttp://www.c.rg/media/fles/Recap_nhC_GSE_Cre_Fctis.pd.

33 See, r example, te plas pt rt by te MrtgageFiace Wrkig Grp, te Mrtgage Bakers Asscia-ti, ad te Bipartisa Plicy Ceters hsig Cm-missi. Tese plas are smmarized i J Grit,

Te $5 Trilli Qesti: Wat Sld We D witFaie Mae ad Freddie Mac? (Wasigt: Ceterr America Prgress, 2013), available at ttp://www.americaprgress.rg/wp-ctet/plads/2013/03/newGSERermMatrix.pd; hadelma, Smit, ad

Trebek, Gvermet-Spsred Eterprises adMltiamily hsig.

34 Te Market Access Fd was frst prpsed i early2011 by te Mrtgage Fiace Wrkig Grp c-veed by te Ceter r America Prgress, alg wita recmmedati r secdary market strctre. Itis paper, te d stads its w ad is t depe-det a particlar strctre. See Mrtgage FiaceWrkig Grp, A Respsible Market r hsigFiace (Wasigt: Ceter r America Prgress,2011), available at ttp://www.americaprgress.rg/isses/sig/reprt/2011/01/27/8929/a-respsible-market-r-sig-face/.

35 nte tat sme te examples i tis ad te llw-ig tree sectis already exist bt are beig r at asmall scale, ad a MAF wld eable tem t reac amc larger ptetial market.
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Making the Mortgage Market Work for America’s Families

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