Urban Institute researchers monitor and assess housing market trends, affordable housing, homelessness, federal housing assistance, racial disparities and housing discrimination, and community revitalization. We recommended greater regulation and reforms for subprime mortgages before the housing market collapse and continue to follow its effects on families and neighborhoods. Our research informs decisionmakers with neighborhood-level data and evaluations of federal housing programs. Read more.
The heightened and uncertain cost of servicing delinquent mortgage loans is a significant, although underappreciated, constraint on access to credit. Lenders can price loans to reflect the anticipated servicing costs, but it is very difficult to price for the uncertain costs of default servicing. The penalties resulting from not meeting the GSE and FHA timelines, along with restrictive and anachronistic limits on reasonable foreclosure expenses, create uncertainties that are difficult to quantify and price for. The result: lenders forgo lending to borrowers more likely to go delinquent. The FHFA has made great strides with recent changes to compensatory fees, but more needs to be done. Servicing delinquent FHA loans presents an even greater challenge. To expand the tight credit box, these servicing issues must be addressed.
This month’s edition of At A Glance, the Housing Finance Policy Center’s reference guide for mortgage and housing market data, includes updated indicators of credit availability, a breakdown of the composition of the US Housing Market from the Federal Reserve Flow of Funds report, and details of the latest GSE risk-sharing deals.
The Housing Finance Policy Center’s new measure of the rate at which mortgage applications are denied – the real denial rate (RDR)– improves upon existing denial rate measures by considering only low-credit-profile applicants. The RDR better tracks trends in credit accessibility over time and reveals that the conventional channel has had a consistently tighter credit box over time than the government channel. The RDR also shows much smaller racial and ethnic distinctions in mortgage denial rates over time than are shown by the traditional measure.
The Housing Finance Policy Center’s new measure of credit availability--the HCAI--improves upon existing measures of credit availability by calculating with great specificity how much actual risk the market is taking at any given point in time. The HCAI is extremely robust and objective and produces intuitive results because it takes several borrower’s characteristics as well as loan characteristics into account and is weighted for the likelihood of economic downturns. It is also completely transparent.
Homeowners and subsidized renters experience significantly lower material hardship than unsubsidized renters, even after taking account of income, income variability, race, education, and family structure. Homeownership conveys more protection against hardship than do rent subsidies. Using the Survey of Income and Program Participation, we estimate the likelihood of experiencing any material hardship is about 9.2 percent lower for subsidized renters and 24.5 percent lower for homeowners. Even homeowners who bought just before the recent crash in home prices experienced less hardship than unsubsidized renters. White, black, and Hispanic homeowners all suffer less material hardship than their renting counterparts (whether subsidized or unsubsidized). This reduction is most pronounced among Hispanic families.