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Its Time to Talk About Housing
7 Questions the 2012 Presidential Candidates Needto Answer on the Ongoing Housing Crisis
John Griffith, Julia Gordon, and David Sanchez August 15, 2012
Te ongoing housing crisis remains one o he bigges drags on our economic recovery.
Bu less han hree monhs beore a presidenial elecion viewed by many as a reerendum
on he economy, housing is litle more han a side conversaion on he campaign rail.1
Presiden Barack Obama has barely menioned housing in recen monhs, aside romoccasional piches or reorms o help more homeowners renance.2 Presumpive
Republican nominee Mit Romneys 59-poin economic plan unveiled las year makes
only a couple o passing reerences o housing, and Gov. Romney is ye o release any
subsanive housing proposals since.3
As our presidenial hopeuls say silen, he sluggish housing marke coninues o plague
our economy. Te hisoric decline in home prices since 2006 has cos Americans more
han $7 rillion in household wealh,4 orced millions o amilies ou o heir homes,5 and
le nearly one in our homeowners owing more on heir morgages han heir homes
are worh.6
Privae invesmen in housing is a racion o is hisoric norm, ranslaing obillions in los economic oupu and millions o missing jobs.7 And more han ve years
ino he crisis, he U.S. morgage marke remains on lie suppor as he ederal govern-
men guaraneed more han 95 percen o home loans made las year. 8
Te U.S. housing marke is where he Grea Recession began9 and were unlikely o see
a ull recovery unil he marke heals. Te housing secor hisorically accouns or abou
one-h o our economy10 and housing booms paved he pah o our las hree eco-
nomic recoveries.11 Bu ew analyss expec such a boom anyime soon.
We can no longer aord o ignore hese problems. As he presidenial campaign shis
ino high gear in he coming weeks, Presiden Obama and Gov. Romney mus lay ou
heir respecive visions or housing in he Unied Saes. Tis brie lays ou seven essen-
ial quesions he presidenial candidaes need o answer on housing, including:
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1. Wha will you do o preven more unnecessary oreclosures and keep more amilies
rom losing heir homes?
2. How will you address he problem o underwaer morgages?
3. How will you revialize communiies already hi hard by he oreclosure crisis?
4. How will you mee he pressing need or aordable renal housing?
5. Wha will you do o assure ha working and middle-class amilies can achieve
homeownership in he uure?6. Wha do you plan o do wih he governmen-backed morgage gians Fannie Mae
and Freddie Mac, and wha will ake heir place in he morgage marke o he uure?
7. How do you plan o proec households rom predaory lending and discriminaion
in he U.S. morgage marke?
Each quesion includes key acs or voers, reporers, and oher key sakeholders,
as well as a brie discussion o why he issue maters and CAPs recommendaion or
xing he problem.
1. Five years after the housing bubble burst, experts suggest we may be only halfway through
the resulting foreclosures, with millions still to come. Do you think the federal government
should do more to help prevent unnecessary foreclosures? If so, how?
Foreclosure is oen he wors-case scenario or every
pary involved, since i resuls in exraordinarily high
coss o borrowers, lenders, and invesorsno o
menion he spillover eecs on he surrounding
communiy and he broader economy. And since
millions o a-risk morgages are owned or guaran-eed by he ederal governmen, axpayers are on he
hook or billions in oreclosure-relaed losses.
Tere are several ways o lower an a-risk bor-
rowers monhly paymens and increase he chance
o repaymen. I he borrower is curren on heir
paymens, hey oen have he choice o renance o
odays hisorically low ineres raes, saving an aver-
age o $2,600 a year in ineres paymens.18 I he
borrower has allen behind, he invesor can oen
save money by working ou a new deal, usually by
exending he loans erms, modiying he ineres
rae, deerring paymens, or lowering he amoun
he borrower acually owes on he loanso-called
principal reducion. Or, i he borrower eiher can
no longer aord he house or does no wish o say,
FIGURE 1
We may only be halfway through the foreclosure crisis
Total number of foreclosures vs. loans at serious risk (in millions),
as of March 2011
Sources: CoreLogic and Amherst Securities
0
1
2
3
4
5
6
7
8
Millions of mortgages
Mortgages in
foreclosure process
1.4 million
Completed foreclosures
since Sept. 2008
3.5 million
60+ days delinquent
3.5 million
Current but compromised
payment history
1.5 million
Steadily current
but underwater
2.4 million
Foreclosures completed
or in process
Mortgages at risk of
foreclosure/liquidation
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3 Center or American Progress | Its Time to Talk About Housing
hey can sill leave graceully wihou going hrough a oreclosure, eiher by handing he
home back o he lender (known as a deed-in-lieu-o-oreclosure) or negoiaing a shor
sale wih he morgage invesor.
In a well-uncioning marke, he lender or morgage invesor responsible or he loan
considers a range o opions when deciding which inervenion is bes or he specic
borrower, and negoiaes a deal ha minimizes losses and keeps amilies in heir homeswhen possible. Bu were no in a well-uncioning marke. Recen experience has shown
ha morgage servicershe companies in charge o collecing imely morgage pay-
mens on behal o he invesorare oen unwilling or unable o work wih sruggling
homeowners, even when hose homeowners wan o work wih hem. Te resul is
unnecessary oreclosures which harm he borrower, he invesor, surrounding home-
owners, and he larger economy.
Streamline renancing or all borrowers current on their monthly payments and
meet minimum underwriting standards (See: John Grith, Tossing a Lieline to
Underwater Homeowners (Washington: Center or American Progress, 2012)) and
establish clear and air standards or mortgage servicers dealing with struggling bor-
rowers. (See: Peter Swire and Jordan Eizenga, The Importance o a Homeowner Bill
o Rights (Washington: Center or American Progress, 2012)
CAP Policy Recommendation
As o March 2012, bank
other nancial institutio
had completed approxi
mately 3.5 million orecsures since the nancia
crisis began in Septemb
2008, with another 1.4
million loans still in the
oreclosure process.12 T
month Wall Street analy
predicted as many as 7.
million to 9.3 million at
borrowers were yet to
oreclosure or liquidatio
Roughly 25 percent o
Arican American and L
tino borrowers have eit
lost their homes or are
serious risk o oreclosu
today, compared to jus
12 percent o their whi
counterparts. 14
The typical oreclosure
costs lenders and inves
up to $50,000,15 borrow
up to $7,000 in admini
tive costs alone,16 and
governments up to $34
in lost property taxes a
associated expenses,17
beore accounting or t
indirect costs to the su
rounding community.
Fast Facts
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2. From the peak of the market in 2006, the total amount of home equity in the United States
declined by more than $7 trillion, leaving all homeowners with less wealth and more than
11 million families owing more than their homes are worth. How do you plan to address this
pressi ng problem of underwater mortgages?
I he housing marke is weighing down our economic recovery, negaive equiy is he
anchor a he end o he chain. Underwaer borrowers are a signicanly higher risk ooreclosure han borrowers wih equiy in heir homes, in par because i somehing unex-
peced happenssuch as a deah in he amily, divorce, disabiliy, or emporary bou o
unemploymenhe borrower has no cushion o all back on.24 Tese borrowers ypically
have rouble renancing o odays hisorically low raes simply because hey don have
equiy and hey oen have rouble selling heir homessay, o move or a new job oppor-
uniybecause he bank has o agree o ake a loss hrough a shor sale.
Ten here are he broader economic impacs o negaive equiy. Underwaer morgages
consrain lending beyond he housing marke, as home equiy is a criical source o capial
or collaeral or small businesses,25
college sudens,26
and elderly aduls.27
Homeownerswih litle or no equiy are oen relucan o inves in renovaions and home improve-
mens, siing demand or home-relaed producs rom window curains o washing
machines.28 Borrowers digging heir way ou o morgage deb spend less in sores, making
businesses leery o invesmen. For hese and oher reasons, analyss have observed ha
he recovery is weakes in places where morgage deb is he highes.29
Depending on the sour
between 24 percent19 a
31 percent20 o homeow
with mortgages are undwater, totaling between
$700 billion and $1.2 tr
in negative equity, the
amount above the valu
a home an underwater
rower owes.
Between 2005 and 2009
typical Hispanic homeo
saw their home equity d
cline by 51 percent, rou
two-and-a-hal times th
decline or black and w
borrowers.21
O the roughly 8 million
derwater homeowners t
are current on their mon
mortgage payments, mo
than 40 percent are likel
unable to renance to to
historically low interest
rates simply because the
have private loans that a
ineligible or certain ede
programs.22
Analysis by the Federal
Housing Finance Agenc
ound that targeted pri
cipal reductions o loan
backed by Fannie Mae a
Freddie Mac could save
the companies $3.6 billmostly rom ewer ore-
closures. Those savings
not count the boost to t
economy rom increase
consumer spending.23
Fast Facts
FIGURE 2
Nearly one in four homeowners in the United States
owes more on their mortgage than their home is worth
Total number of mortgages by equity level (in millions), Q1 2012
Severely underwater
(by 25 percent or more)
5.1 million
Moderately underwate
(by 0 percent
to 25 percent)
6.3 million
Nearly underwater
(less than 5 percen
equity)
2.3 million
More than
5 percent equity
34.4 million
Source: CoreLogic
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3. For the communities already hit hard by the foreclosure crisis, how do you plan to
revitalize neighborhoods and stabilize local housing markets?
While oreclosures have skyrockeed naionwide, some areas are paricularly hard hi, rom
impoverished urban neighborhoods o ghostown exurbs. Each oreclosure drives he sur-
rounding propery values down urher, leading o a downward spiral o more oreclosures
and addiional value decline. Muliple oreclosures cos saes and localiies enormous
sums o money in los ax revenue, promping deep cus o criical public services.
A he same ime, vacan or inadequaely mainained homes atrac crime, arson, and
squaters, which increases coss or re, police, and oher services. As people leave
he neighborhoods, local businesses are orced o shuter heir doors, leading o ye
anoher spiral o deparure, oreclosures, and business ailures. Healh and saey can beimpaced by uncolleced garbage, dilapidaed homes, and abandoned pes; or example,
in saes such as Caliornia and Florida, unended swimming pools have become a
breeding ground or disease-carrying mosquios.34
In some blighed neighborhoods he overhang o oreclosed homesmany o which are
owned by he governmen hrough Fannie Mae, Freddie Mac, and he Federal Housing
Adminisraion35glus he or-sale marke, keeping home prices low. In ohers, ore-
closed homes are largely being purchased by invesors and rened ou, which can pro-
vide a useul source o aordable housing bu may also signicanly change he naure o
he neighborhood wihou addiional invesmen and atenion.
Encourage targeted principal reductions at Fannie Mae and Freddie Mac using
shared appreciation, where the entities agree to write of some o the outstand-
ing balance in exchange or a portion o any uture price appreciation on the home.(See: John Grith and Jordan Eizenga, Sharing the Pain and Gain in the Mortgage
Market (Washington: Center or American Progress, 2012)
CAP Policy Recommendation
On average, a oreclosu
reduces the value o a
house by 27 percent an
reduces the value o al
other houses in the ne
borhood by 1 percent.3
In 2009 alone analysts
estimated that 2.4 milli
oreclosures caused pro
erty values to drop or 6
million neighboring hototaling more than hal
trillion dollars in spillov
home devaluation. That
an average devaluation
$7,200 per neighboring
home that year.31
Nearly hal o all oreclo
properties are located i
10 percent o the nation
census tracts.32 One-qu
o oreclosures or at-risk
loans are in low-income
neighborhoods, while 2
percent are in minority
neighborhoods.33
Fast Facts
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Rehabilitate certain government-owned oreclosed properties and convert them to
afordable, energy-ecient rentals through Rehab-to-Rent. (See: Alon Cohen, Jor-
dan Eizenga, John Grith, Bracken Hendricks, and Adam James, Rehab-to-Rent Can
Help Hard-Hit Communities and Our Economy (Washington: Center or American
Progress, 2012))
CAP Policy Recommendation
FIGURE 3
Foreclosures have massive spillover costs to the local community
Estimated cost of each foreclosure to key stakeholders
0 $50,000 $100,000 $150,000 $200,000 $250,000
Lower home values
for roughly 30
neighboring families
Losses and associated
expensive to the
lender or investor
Associated expenses
and revenue shortfalls
for local government
Administrative
costs to the
homeowner
$209,000
$50,000
$34,000
$7,200
Sources: Center for Responsible Lending, NeighborWorks, and The Urban Institute
4. The need for affordable rental housing continues to rise, with 5 million more low-
income renters than there are affordable rental units. At a time of fiscal austerity, how
do you plan to meet this unmet need?
Nearly 100 million Americansroughly one-hird o he U.S. populaionlive in renal
housing.44 Reners on average earn less han homeowners ye spend more on housing
each monh as a percenage o income45 and hey ace an even more expensive uure.
Renal vacancies hi a 10-year low in 201146 and rens increased las year in 24 o he 25
markes racked by realy rm rulia.47 Te oreclosure crisis is parly o blame or hese
increases: Families oen have o wai up o seven years ollowing a oreclosure o obain
nancing o purchase anoher home, during which hey have no choice bu o ren.
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The total number o severely cost-burdened households (those
ing more than hal their income on housing) nearly doubled over
past decade.36 The afordability crunch has disproportionally hit c
munities o color: Today 27 percent o black amilies and 25 perceHispanic amilies are severely burdened, compared to just 15 per
o white amilies.37
Twenty-seven percent o renters are severely cost-burdened, whi
more than twice the rate or homeowners.38 Only about a quarte
cost-burdened renters receive ederal assistance.39
Today there are 5.1 million more low-income renters than there a
afordable rental unitsmore than double the shortall observed
2001. O the afordable units that are available, more than 40 per
are occupied by higher-income renters.40
Last years budget cuts hit afordable housing programs especially ha
including a 38 percent cut to the Department o Housing and Urban
Developments HOME Investment Partnerships program and a 12 pe
cut to the Community Development Block Grant program.41 Total ed
unding or public housing decreased by more than 20 percent betw
2010 and 201242 despite approximately $26 billion in unmet repair a
renovation needs in the nations aging public housing stock.43a
Fast Facts
FIGURE 4
The affordable rental gap is getting wider
Total very low-income renters vs. total affordable
rental units (in millions), 2001 and 2010
Source: Harvard Joint Center for Housing Studies, The State of the Nation's
Housing 2012 (JCHS tabulations of US Census Bureau, American Community
Surveys)
0
2
4
6
8
10
12
Millions of households
2001 2010
Very low-income renters Affordable rental units
Gap:
2.4 million
Gap:
5.1 million
Wages have no kep up wih his increase in rens,
leaving one in our reners oday paying more han
hal o heir monhly income on ren.48 Meanwhile,
as he number o low-income reners grew by 2.2
million over he las decade, he number o adequae
and aordable renal unis acually decreased.49 As
needs skyrockeed, lawmakers acually cu ederalsuppor o key aordable housing programs such as
public housing, he HOME Invesmen Parnerships
program, and he Communiy Developmen Block
Gran program.
Unaordable rens are depressing demand or
goods and services. Lower-income amilies in una-
ordable housing unis spend 50 percen less on
clohes and healh care, 40 percen less on ood, and
30 percen less on insurance and pensions com-pared o amilies in aordable unis, according o
Harvards Join Cener on Housing Sudies.50
Capitalize the Housing Trust Fund, ramp up unding or Low Income Housing Tax Credits,
guarantee certain debt issued by Community Development Financial Institutions, and
establish a stable, liquid, and responsible market or multiamily housing nance. (See:
Mortgage Finance Working Groups Multiamily Subcommittee, A Responsible Market
or Rental Housing Finance (Sponsored by the Center or American Progress, 2010)
CAP Policy Recommendation
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The U.S. homeownershi
rate ell rom 69.2 perce
2004 to 65.4 percent in t
rst quarter o 2012thlowest level in 15 years.5
Still, nearly three-quarte
o renters and homeown
ers surveyed by Fannie M
believe that now is a go
time to buy a home.52
Today 48 percent house
holds o color are home
owners, the lowest leve
since 2000. By comparis
74 percent o white hou
holds own their home.5
Lenders originated abo
$400 billion in home
purchase loans in 2011,
compared to a peak o $
trillion in 2005.54
Credit standards have go
much tighter since the c
began. In 2007 the avera
Fannie Mae-backed loan
covered 75 percent o th
homes value (meaning
borrower o covered the
other 25 percent throug
down-payments and mo
gage insurance) and we
to a household with a cr
score o 716. Last years
average loan covered ju
percent o the homes vaand the average borrow
had a credit score o 762
Fast Facts5. The U.S. homeownership rate has dropped significantly in recent years as a result of
foreclosures and tightened credit standards. Do you think it is important for more
Ame rica ns to be able t o buy hom es? If so, what role do you think the fed eral gove rnment
should play in achieving that goal?
Homeownership remains a key par o he American Dream. Owning a home pro-
vides economic sabiliy or middle-class amilies, builds wealh ha can be rans-erred across generaions, and encourages residens o mainain heir properies and
inves in heir communiies.
Bu in recen years i has become increasingly difcul or he average American amily
o become a homeowner. In response o he oo-loose credi sandards o he housing
bubble, many morgage lenders have overcorreced by exending credi o only he saes
possible borrowers. Meanwhile, governmen regulaors are wriing rules ha will likely
deermine who ges a morgage or decades o come. Tere is also concern ha exces-
sively high down-paymen requiremens could lock many crediworhy amilies ou o
he marke compleely.
In designing he morgage marke o he uure, policymakers mus consider he
righ balance beween reining in excessive risk s and promoing reasonable access o
morgage credi, as well as he appropriae levels o homeownership versus rener-
ship in our counry.
Establish a new system o housing nance in the United States that reins in excessive
risk-taking, supplies mortgage capital in every community even in times o eco-
nomic duress, and preserves long-term, reasonably priced products like the 30-year,
xed-rate mortgage. (See: A Responsible Market or Housing Finance, 2011)
CAP Policy Recommendation
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6. What do you plan to do with the government-backed mortgage giants Fannie Mae and
Freddie Mac? If you plan to eliminate them, what will you replace them with and how will
you transit ion to a new syste m without causing undue harm to the fragile housing market?
For decades, he governmen-conrolled morgage gians Fannie Mae and Freddie Mac
have played a crucial role in he U.S. morgage nance sysem as a secondary morgage
marke. o help capial ow ino he marke, Fannie and Freddie purchase home loans
made by privae rms, provided hey mee sric size, credi, and underwriing sandards.
Tey hen guaranee imely paymen o principal and ineres on hose loans, eiher as
invesmens held in a porolio or hrough morgage-backed securiies issued o ouside
invesors. Since morgage lenders no longer have o hold hese loans on heir balance
shees, hey have capial available o make more loans o crediworhy borrowers.
In Sepember 2008 Fannie and Freddie suered massive losses as he housing marke
crumbled around hem, orcing he ederal governmen o ake conrol o he companies
hrough a legal process called conservaorship. Since hen he governmen has backed
nearly all home loans made in he Unied Saes, as invesors have shown litle appeie
or purchasing morgages wihou a governmen guaranee.
FIGURE 5
As mortgage lending declined since the crisis began,
so too did homeownership
Total home purchase loan originations and U.S. homeownership rates,
by quarter since 2006
60%
64%
68%
72%
76%
80%
0
$100
$200
$300
$400
$500
2006 2007 2008 2009 2010 2011 2012
Home purchase loan originations
Homeownership rate
Home purchase loan originations ($ billions) Homeownership rate
Sources: MBA Quarterly Origination Estimates, U.S. Census Bureau
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Gradually wind down Fannie Mae and Freddie Mac and replace
them with a new system capitalized by private capital, with an
explicit government backstop against catastrophic risk on cer-
tain well-regulated mortgage products. (See: John Grith, The
$5 Trillion Question: What Should We Do with Fannie Mae and
Freddie Mac? (Washington: Center or American Progress, 2012))
CAP Policy Recommendation
FIGURE 6
Fannie Mae and Freddie Mac back more
than half the mortgage market today
Total mortgage loans outstanding by source
of credit (in millions, as of May 2012)
17.7 million
Fannie Mae
11.6 million
Freddie Mac
9.1 million
FHA, VA,
and other
government
agencies
16.9 million
Private banks
Source: Fannie Mae
Since being placed under government control in September 20
Fannie Mae and Freddie Mac have required roughly $150 billion
taxpayer support.56 Analysts estimate it could take as long as 15
years or the companies to pay that money back.57
More than 95 percent o new home loans made last year were ba
by the ederal government through Fannie Mae, Freddie Mac, an
the Federal Housing Administration.58 At the height o the bubbl
2006, these entities backed less than 35 percent o loan originatio
Fannie and Freddie own or guarantee a combined $5 trillion in
mortgage assets, more than hal o all outstanding home loans in
United States.59
The nancial situations at both Fannie Mae and Freddie Mac have
improved in recent months. Fannie has reported prots in its pas
quarters, while Freddie in August reported its best quarterly earn
in 10 years.60
Fast FactsJus abou everyone agrees ha he curren level o
governmen suppor is unsusainable in he long run
and privae invesors will evenually have o assume
more risk in he morgage marke. Bu policymakers
have ye o grapple wih oher imporan quesions:
Wha sor o presence should he ederal governmen
have in he housing marke o he uure? And whenis he righ ime o sar moving oward his new
sysem o U.S. housing nance?
Te answers o boh quesions will have major
implicaions or he availabiliy and aordabiliy
o morgage nanceand hus access o home-
ownershipor millions o American amilies.
For example, many expers believe ha he 30-year
xed-rae morgage, now a pillar o he U.S. housing
marke, would largely disappear wihou a govern-men guaranee.61
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Vigorously implement key mortgage-market reorms laid out in the Dodd-Frank Act,
including a requirement that lenders must ensure a borrowers ability to pay back a
home loan at the time o origination. Also, make air and equitable access to aford-
able mortgage credit a key pillar o any uture system o housing nance. (See: A
Responsible Market or Housing Finance, 2011)
CAP Policy Recommendation
Subprime loans jumped
9 percent o total mortg
originations in 1996 to 2
percent in 2006.62
That yan astonishing 61 perce
o subprime loans went
borrowers with credit sc
high enough to qualiy
conventional loans with
better terms.63
During the housing bubb
Arican American or Lati
borrowers with good cre
were three times more li
than their white counter
to receive a risky subprim
loan, and more than thre
times more likely to rece
high-interest loan.64
Thirty-eight percent o
Arican American applic
or conventional home
purchase loans were tu
down in 2010, compare
to 23 percent in 2004. T
denial rate or white ap
plicants climbed rom 1
percent to 15 percent o
that period.65
The Federal Housing Ad
istration, a government
mortgage insurer, prov
access to credit or 60 p
cent o all Arican Amer
and Hispanic homebuy2010, compared to less
10 percent in 2006.66
Fast Facts7. At the peak of the housing bubble, more than half of subprime loans went to borrowers
who could have qualified for conventional, safe mortgages, many of whom were borrowers
of color. How do you plan to prevent racial and ethnic discrimination in the U.S. housing
market and promote access to affordable, sustainable mortgages to all capable borrowers?
During he heigh o he housing bubble, loan originaors backed by Wall Sree capial
oen seered borrowers oward risky subprime loans, even when hey qualied or beterloans. Tese predaory producs, such as adjusable-rae morgages wih pricing gimmicks,
were designed o ail, boh encouraging borrowers o borrow ar more han hey could
manage and requiring he borrower o renance every couple years. No surprisingly, hese
loans deauled a signicanly higher raes han convenional morgages.67 Borrowers o
color were disproporionaely argeed, as black and Hispanic borrowers were hree imes
more likely o be seered o subprime loans han heir whie counerpars.68
Regulaors are nalizing new rules or he enire morgage nance sysem, including
bans on predaory lending by loan originaors. In he meanime, privae lenders have
drasically scaled back lending aciviy by ighening underwriing sandards or mor-gage loans, wih serious consequences or communiies o color. For example, home-
ownership raes have declined by abou 4.3 percenage poins or black households
since heir peak, nearly double he decline or whie households.69
Racial dispariy and discriminaion in morgage lending is nohing new, and eors
rom ederal and sae governmens during he 1990s and early 2000s made slow bu
sure headway in reducing he racial homeownership gap. Bu he recen crisis has erased
mos o ha progress.70
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12 Center or American Progress | Factsheet Title
FIGURE 7
Racial and ethnic disparities persist in the mortgage market
People of color are less likely to be homeonwers, were more likely to receive risky subprime loans during the bubble,
and are less likely to receive a loan at all today, compared to their white counterparts
Percent of borrowers
in foreclosure or at
serious risk today
Percent of borrowers
who received high-
interest loans despite
good credit (FICO > 660)
Percent of borrowers
who received high-risk
loans despite good
credit (FICO > 660)
Percent of mortgage
applicants who
were denied
African American
Hispanic
Non-Hispanic white
Sources: The Center for Responsible Lending and The Federal Reserve
0
10%
20%
30%
40%
50%
60%
70%
80%
Homeownership
rate in 2011
A moment of urgency
In recen monhs, several analyss have prediced ha he housing marke has nally bo-
omed ou and ha were now in he beginning sages o a housing recovery.71
We hopehas rue.
Bu even i he wors days are indeed behind us, he housing crisis is ar rom over.
Millions o sruggling amilies sill risk losing heir homes. ens o millions o reners
sill ace unmanageable housing coss. Counless more crediworhy amilies sill dream
o owning a home bu can ge approved or a morgage.
Each o hese problems has ripples beyond he housing marke. Wheher is a home-
owner drowning in morgage deb, a low-income amily paying hal heir income on
ren, or a poenial homebuyer being closed ou o he marke, he crisis coninues o
sie demand or goods and services, impeding eors o grow and creae jobs.
Our presidenial hopeuls canno say silen on his criical issue. Aer monhs o argu-
ing abou ax reorm, budge cus, healh care, ousourcing, and privae equiy, is ime
or housing o ge is ime in he spoligh.
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13 Center or American Progress | Its Time to Talk About Housing
1 Bloomberg Editorial Board, Obama and Romney ShouldSay What Theyll Do About Housing, Bloomberg, July 30,2012, available at http://www.bloomberg.com/news/2012-07-30/obama-and-romney-should-say-what-they-ll-do-about-housing.html.
2 Matt Compton, President Obama Calls or a SimplerRenancing Process, The White House Blog, May 11, 2012,available at http://www.whitehouse.gov/blog/2012/05/11/president-obama-calls-simpler-renancing-process.
3 Romney or America, Believe In America: Mitt RomneysPlan For Jobs And Economic Growth (2011), available at
http://www.mittromney.com/blogs/mitts-view/2011/09/believe-america-mitt-romneys-plan-jobs-and-economic-growth.
4 Federal Reserve Board, The U.S. Housing Market: CurrentConditions and Policy Considerations (2012), available athttp://ederalreserve.gov/publications/other-reports/les/housing-white-paper-20120104.pd.
5 Debbie Gruenstein Bocian and others, Lost Ground, 2011:Disparities in Mor tgage Lending and Foreclosures (Dur-ham, North Carolina: Center or Responsible Lending, 2011),available at http://www.responsiblelending.org/mortgage-lending/research-analysis/Lost-Ground-2011.pd.
6 CoreLogic, CoreLogic Reports Negative Equity Decreases inFirst Quarter o 2012, Press Release, July 12, 2012, availableat http://www.corelogic.com/about-us/researchtrends/as-set_upload_le912_15196.pd.
7 Bipartisan Policy Center, Housings Impact on the Economy
(2012), available at http://bipartisanpolicy.org/projects/housing/inographic-economy.
8 John Carney, Too Big Not to Fail , The New York Times,August 11, 2010, available at http://ww w.nytimes.com/2010/08/12/opinion/12carney.html.
9 Adam J. Levitin and Susan M. Wachter, Explaining theHousing Bubble Georgetown Law Journal 100 (4) (2012):1177-1258.
10 National Association o Home Builders, HousingsContribution to Gross Domestic Product (GDP)(2012), available at http://w ww.nahb.org/generic.aspx?genericContentID=66226.
11 Eric S. Rosengren, Housing and Economic Recovery,Speech Delivered at the Economic Outlook Seminar, Stock-holm, Sweden, September 28, 2011, available at http://www.bos.rb.org/news/speeches/rosengren/2011/092811/
index.htm.
12 CoreLogic, CoreLogic Reports 69,000 Completed Fore-closures Nationally in March, Press Release, May 1, 2012,available at http://www.corelogic.com/about-us/news/corelogic-reports-69,000-completed-oreclosures-national-ly-in-march.aspx.
13 Laurie S. Goodman, Testimony beore the Senate Bank-ing Committee, Strengthening the Housing Marketand Minimizing Losses to Taxpayers, March 15, 2012,available at http://banking.senate.gov/public/index.cm?FuseAction=Files.View&FileStore_id=096e0-8500-41a5-a02-0139d0d2e07.
14 Center or Responsible Lending, Lost Ground: CRL ResearchShows Foreclosure Crisis Not Halway Over, Press Release,November 17 2011, available at http://www.responsi-blelending.org/media-center/press-releases/archives/Lost-Ground-CRL-Research-Shows-Foreclosure-Crisis-Not-Halway.html.
15 Desiree Hatcher, Foreclosure Alternatives: A Case orPreserving Homeownership (Chicago: The Federal ReserveBank o Chicago, 2006).
16 Family Housing Fund, Cost Eectiveness o Mortgage Fore-closure Prevention (1995), available at http://www.hund.org/_dnld/reports/MFP_1995.pd.
17 William C. Apgar, Mark Duda, and Rochelle NawrockiGorey, The Municipal Cost o Foreclosures: A ChicagoCase Study (Minneapolis: Homeownership Preserva-tion Foundation, 2005), available at http://www.nw.org/network/neighborworksProgs/oreclosuresolutionsOLD/documents/2005Apgar-DudaStudy-FullVersion.pd.
18 Mitchell Remy, Deborah Lucas, and Damien Moore, AnEvaluation o Large-Scale Mortgage Renancing ProgramsWorking Paper 2011-4 (Congressional Budget Ofce, 2011),available at http://www.cbo.gov/sites/deault/les/cboles/
attachments/09-07-2011-Large-Scale_Renancing_Pro-gram.pd
19 CoreLogic, CoreLogic Reports Negative Equity Decreases inFirst Quarter o 2012.
20 Zillow, Despite Home Value Gains, Underwater Homeown-ers Owe $1.2 Trillion More than Homes Worth, PressRelease, May 24, 2012, available at http://zillow.mediaroom.com/index.php?s=159&item=278.
21 Harvard Joint Center or Housing Studies, The State othe Nations Housing 2012: Demographic Drivers (2012),http://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/son2012_demographic_drivers.pd.
22 John Grifth, Tossing a Lieline to Underwater Homeown-ers (Washington: Center or American Progress, 2012), avail-able at http://w ww.americanprogress.org/issues/2012/05/homeowners_lieline.html.
23 Federal Housing Finance Agency, Review o Options Avail-able or Underwater Borrowers and Principal Forgiveness(2012), available at http://www.ha.gov/webles/24108/PF_FHFApaper73112.pd.
24 Laurie S. Goodman and others, Negative Equity TrumpsUnemployment in Predicting Deaults, The Journal o FixedIncome 19 (4) (2010): 67-72.
John Grifth is a Policy Analyst with the Housing team at the Center or American Progress.
Julia Gordon is the Centers Director o Housing Finance and Policy. David Sanchez is a
Special Assistant with the Centers Economic Policy team.
Endnotes
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14 Center or American Progress | Its Time to Talk About Housing
25 Mark E. Schweitzer and Scott A. Shane, The Eect o FallingHome Prices on Small Business Borrowing, Federal ReserveBank o Cleveland Economic Commentary, December 10,2010, available at http://www.clevelanded.org/research/commentary/2010/2010-18.cm.
26 Michael F. Lovenheim, The Eect o Liquid Housing Wealthon College Enrollment, Journal o Labor Economics 29 (4)(2011): 741-771.
27 Edward Wyatt, Report Highlights a Rise in Reverse Mort-gages, The New York Times, June 28, 2012, availabl e at
http://www.nytimes.com/2012/06/28/business/economy/report-highlights-a-rise-in-reverse-mortgages.html.
28 Brian T. Melzer, Mortgage Debt Overhang: Reduced Invest-ment by Homeow ners with Negative Equity, Working paper(Kellogg School o Management, 2012), available at http://www.kellogg.northwestern.edu/aculty/melzer/Papers/CE_debt_overhang_082210.pd.
29 Mike Konczal, How Mortgage Debt is Holding Back theRecovery (Washington: The Roosevelt Institute, 2012), avail-able at http://ournancialsecurity.org/blogs/wp-content/ournancialsecurity.org/uploads/2012/06/Mike-Konczal-How-Mortgage-Debt-is-Holding-Back-the-Recovery-PAPER.pd.
30 Massachusetts Institute o Technology, How ForeclosuresHurt Everyones Home Values, Press Release, July 20, 2010,available at http://web.mit.edu/press/2010/housing-prices.html .
31 Center or Responsible Lending, Soaring Spillover: Accel-erating Foreclosures to Cost Neighbors $502 Billion in 2009Alone; 69.5 Million Homes Lose $7,200 on Average (2009),available at http://www.responsiblelending.org/mortgage-lending/research-analysis/soaring-spillover-3-09.pd.
32 Harvard Joint Center or Housing Studies, The State othe Nations Housing 2012: Key Facts (2012), available athttp://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/son_2012_key_acts.pd.
33 Center or Responsible Lending, Foreclosure DamageIndex (2011), available at http://ww w.responsiblelending.org/mortgage-lending/tools-resources/oreclosure-dam-age-index.html.
34 Associated Press, Pools Become Mosquito Havens in Fore-closure, MSNBC, April 22, 2009, available at http://www.msnbc.msn.com/id/30344932/ns/technology_and_science-science/t/pools-become-mosquito-havens-oreclosure/.
35 Bill McBride, Fannie, Freddie, FHA REO declined 18%Year-over-year, Calculated Risk, August 8 2012, availableat http://www.calculatedriskblog.com/2012/08/annie-reddie-ha-reo-declined-18-year.html.
36 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Housing Challenges (2012), avail-able at http://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/son2012_housing_challenges.pd.
37 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Appendix Tables (2012), availableat http://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/son2012_appendix_tables.pd.
38 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Key Facts.
39 Barbara Sard and Will Fischer, Renters Tax Credit WouldPromote Equity and Advance Ba lanced Housing Policy,
(Washington: Center on Budget and Policy Priorities, 2012),available at http://w ww.cbpp.org/les/7-13-12hous.pd.
40 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Rental Housing (2012), available athttp://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/son2012_rental_housing.pd.
41 National Council o State Housing Agencies, FY 2012Minibus Appropriations Bill Cuts HOME and CDBG, IncreasesFHA Loan Limit, National Council o State Hou sing AgenciesBlog, November 15, 2011, available at http://www.ncsha.org/blog/y-2012-minibus-appropriations-bill-cuts-home-and-cdbg-increases-ha-loan-limit.
42 Center on Budget and Policy Priorities, Update on 2010Funding or Housing Vouchers and Other HUD Programs(2009), available at http://www.cbpp.org/les/2010-hous-ing-unding.pd; Center on Budget and Policy Priorities,HUD Program Funding or FY 2012 (2011), available athttp://www.cbpp.org/les/11-18-11-IPmemoHUDapprops.
pd.
43 Will Fischer, House Bills Deep Cuts in Public HousingWould Raise Future Federal Costs and Harm VulnerableLow-Income Families (Washington: Center on Budget andPolicy Priorities, 2011), available at http://www.cbpp.org/cms/index.cm?a=view&id=3583.
44 National Multi Housing Council, Quick Facts: ResidentDemographics (2011), available at http://www.nmhc.org/Content.cm?ItemNumber=55508.
45 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Housing Challenges.
46 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Key Facts.
47 Trulia, Trulia Reveals Asking Prices Up For Sixth StraightMonth, Boosted by Fewer Vacancies and Job Growth, Press
Release, August 7, 2012, available at http:// ino.trulia.com/trulia-price-and-rent-monitor-july-2012
48 Harvard Joint Center or Housing Studies, The State o theNations Housing 2011.
49 Harvard Joint Center or Housing Studies, The State o theNations Housing 2011: Rental Housing (2011), available athttp://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/americasrentalhousing-2011.pd.
50 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Housing Challenges.
51 John Gittelsohn, Homeownership Rate in U.S. Falls toLowest Since 1997, Bloomberg, April 30, 2012, available athttp://www.bloomberg.com/news/2012-04-30/homeown-ership-rate-in-u-s-alls-to-lowest-since-1997.html.
52 Pete Bakel, Consumer Expectations on Housing RemainUpbeat Amid Cautious Economic and Financial Outlook,
Fannie Mae, Press Release, August 7, 2012, available athttp://www.anniemae.com/portal/about-us/media/corpo-rate-news/2012/5800.html.
53 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Appendix Tables (2012), availableat http://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/son2012_appendix_tables.pd.
54 Mortgage Bankers Association, Quarterly Origination Esti-mates (2012), available at http://www.mbaa.org/Research-andForecasts/ForecastsandCommentary.
55 Federal Housing Finance Agency, Conservators Report onthe Enterprises Financial Perormance: First Quarter 2012(2012), available at http://www.ha.gov/webles/24016/Conservator%27sReport1Q2012061512_FINAL.pd.
56 Ibid.
57 Jon Prior, Taxpayers may wait 15 years or GSE payback:Moodys, Housing Wire, May 30, 2012, available at http://www.housingwire.com/news/taxpayers-may-wait-15-years-gse-payback-moodys.
58 Carney, Too Big Not to Fail.
59 Ofce o Management and Budget, Fiscal Year 2013 Budgeto the U.S. Government, (Executive Ofce o the President,2012), pp.1431-1432.
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60 Dow Jones News Service, Update: Fannie Mae Swingsto 2nd-Quarter Prot on Credit-Loss Benet, TheWall Street Journal, http://online.wsj.com/article/BT-CO-20120808-711729.html.
61 Richard K. Green, Testimony beore the US Senate Bank-ing Committee, Housing Finance Reorm: Should therebe a Government Guarantee?, September 13, 2011,available at http://banking.senate.gov/public/index.cm?FuseAction=Files.View&FileStore_id=56068079-9c03-40d4-b36a-72913d3850b4.
62 Katalina M. Bianco, The Subprime Lending Crisis: Causes
and Eects o the Mortgage Meltdown (Riverwoods, IL:CCH, 2008), available at http://business.cch.com/banking-nance/ocus/news/Subprime_WP_rev.pd.
63 Rick Brooks and Ruth Simon, Subprime Debacle Traps EvenVery Credit-Worthy, The Wall Street Journal, Decem-ber 3, 2007, available at http://online.wsj.com/article/SB119662974358911035.html.
64 Bocian and others, Lost Ground, 2011: Disparities in Mort-gage Lending and Foreclosures.
65 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Key Facts.
66 U.S. Department o Housing and Urban Development, An-nual Report to Congress Regarding the Financial Status othe FHA Mutual Mortgage Insurance Fund Fiscal Year 2010(2010), available at http://portal.hud.gov/hudportal/docu-ments/huddoc?id=DOC_12561.pd.
67 Center or Responsible Lending, Lost Ground: CRL ResearchShows Foreclosure Crisis Not Halway Over, Press Release,November 17 2011, available at http://www.responsi-blelending.org/media-center/press-releases/archives/Lost-Ground-CRL-Research-Shows-Foreclosure-Crisis-Not-Halway.html.
68 Bocian and others, Lost Ground, 2011: Disparities in Mort-gage Lending and Foreclosures.
69 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Homeownership (2012), availableat http://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/son2012_homeownership.pd.
70 Ibid.
71 David Wessel, Housing Passes a Milestone, The Wall StreetJournal, July 11 2011, available at http://online.wsj.com/article/SB10001424052702303644004577520414196790098.html