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Closing the Gap: Minority Low and Moderate Income First Time Homebuyers and Neighborhoods . Stephanie Moulton, PhD Roy Heidelberg John Glenn School of Public Affairs The Ohio State University Blaine Brockman, JD Ohio Housing Finance Agency. Overview. The State of Homeownership

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closing the gap minority low and moderate income first time homebuyers and neighborhoods

Closing the Gap: Minority Low and Moderate Income First Time Homebuyers and Neighborhoods

Stephanie Moulton, PhD

Roy Heidelberg

John Glenn School of Public Affairs

The Ohio State University

Blaine Brockman, JD

Ohio Housing Finance Agency

  • The State of Homeownership
    • Homeownership trends & gaps
    • Strategies to close the gaps
      • Subprime boom and bust
      • Affordable mortgage programs
  • Affordable Homeownership & Minority Borrowers
    • Appropriately targeted?
    • Movement to opportunity?
  • Concluding Thoughts & Next Steps
    • Importance of institutions supporting affordable mortgage products
    • Limits of homeownership
the state of homeownership4
The State of Homeownership


Source: US Census

why gaps in homeownership
Why Gaps in Homeownership?
  • Income, Wealth & Credit Constraints
  • Household Formation
  • Location Preferences
  • Information Constraints (lack of information about process)
  • Supply Side Constraints
    • Access to lending institutions
    • Access to affordable housing
    • Discrimination

From Hibler et al. 2008; Haurin et al. 2007; Herbert et al. 2005

subprime boom and bust
Subprime Boom and Bust

Source: HMDA Data 2004-2008

lessons from subprime lending
Lessons from Subprime Lending
  • Prevalence among low income and minority borrowers
    • 1/3 of the gains to homeownership among minorities from subprime
    • 2004 HMDA: high cost first lien 32.4% minority; 8.7% non-minority
  • Adversely selecting borrower
    • 30-50% could have qualified for prime mortgages
    • Less educated consumers (75% subprime search; 90% prime)
  • Lender differences/ Institutional determinants
    • Brokers and non-CRA institutions (IMC 5xs high cost in Cleveland)
    • Crowd out between subprime and affordable lending

Calem, Gillen and Wachter 2004; Carr, James H. & J. Schuetz. 2001; Immergluck 2009;

Lax et al. 2004; Nelson 2009

affordable mortgage programs the mortgage revenue bond mrb program
Affordable Mortgage Programs: The Mortgage Revenue Bond (MRB) Program
  • OHFA’s First Time Homebuyer Program
    • Affordable interest rate mortgage (at or below prime)
    • First time homebuyer, less than 115% Area Median Income
    • Downpayment assistance grants and loans
  • Mortgage Sustainability
    • Lower delinquency and foreclosure rates than other similar borrowers
    • Significant lender differences in delinquency and foreclosure
  • Mortgage Affordability
    • Increase in MRB lending in an area, less likely to receive high cost mortgage 2004-2006
key questions
Key Questions
  • Are affordable mortgage programs adequately targeted to minority homebuyers and neighborhoods?
  • What types of neighborhoods do minority homebuyers move to when they purchase their first home, and how does this compare to their previous (renter) neighborhoods?
    • Neighborhood conditions are correlated with better outcomes (including financial and emotional well-being, and positive childhood academic and health outcomes).
    • Homeownership is often presumed to be related to positive neighborhood conditions.

Columbus 2008:

Total purchases by low-income, minority households (neighborhoods)


Cleveland 2008 :

Total purchases by low-income, minority households (neighborhoods)


Cincinnati 2008:

Total purchases by low-income, minority households (neighborhoods)








Spatial Mobility: do home-purchasers buy where they rent?






Data Source: 2006-2008 home purchases through the Ohio Housing Finance Agency First Time Homebuyer Program




Neighborhood Quality: comparing tract-level characteristics

% Urban

proportion of the households living in urban areas

% Minority

proportion of residents who are black or Hispanic

% High School

proportion of residents over 18 who have completed high school

Median Income

median income of the census tract

Median Value

median sales price of homes in the census tract

% Area Income

median income as percent of the MSA or county (non-MSA tracts only) income

Neighborhood change: renter to homeowner













Affordable Instruments: comparing OHFA loans with all LMI homepurchases



Differences in tract characteristics of purchases by

low-income, minority borrowers


All Borrowers, Less than 80% AMI


% More than OHFA purchases

Same as OHFA

All Borrowers, Less than 115% AMI




% Less than OHFA purchases

concluding thoughts questions
Concluding Thoughts & Questions
  • Strategies to increase access to affordable homeownership for minority households
    • Importance of information
      • Understanding mortgages, processes, finances
    • Importance of institutions
      • Access to banks, housing counselors, loan products
  • Homeownership: Opportunity or Burden?
    • Importance of affordability
      • Rent versus Buy?
    • Importance of neighborhood conditions
      • Education quality, housing values, social support, stability
      • Rent versus Buy?
references resources
References & Resources

Alexander, William P., Scott D. Grimshaw, Grant R. McQueen and Barrett A. Slade. 2002. Some Loans are More Equal than Others: Third Party Originators and Defaults in the Subprime Mortgage Industry. Real Estate Economics 30(4): 667-97.

Avery, Robert, Raphael Bostic, Paul Calem and Glenn Canner. 1996. Credit Risk, Credit Scoring and the Performance of Home Mortgages. Federal Reserve Bulletin July 2006. Available online at:

Canner, G., & Bhutta, N. 2008. Staff analysis of the relationship between the CRA and the subprime crisis. Memo to Sandra Braunstein, Director, Consumer and Community Affairs Division, Federal Reserve Board of Governors. Available online at

Carr, James H. & J. Schuetz. 2001. Financial services in distressed communities: Framing the issue, finding solutions. Fannie Mae Foundation, August.

Engelhardt, Gary, Michael Eriksen, William Gale, and Gregory Mills. 2009. What are the social benefits of homeownership? Experimental evidence for low-income households. Journal of Urban Economics. Forthcoming.

Firestone, Simon, Robert Van Order and Peter Zorn. 2007. The Performance of Low-Income and Minority Mortgages. Real Estate Economics 35(4): 479-504.

Galster, George, Dave E. Marcotte, Marvin B. Mandell, Hal Wolman, and Nancy Augustine. 2007. “The Impact of Parental Homeownership on Children’s Outcomes during Early Adulthood,” Housing Policy Debate, Vol. 18, No. 4, pp. 785-827.

Hartarksa, Valentina, Claudio Gonzalez-Vega, and David Dobos. 2002. Credit Counseling and the Incidence of Default on Housing Loans by Low Income Households. Rural Finance Program, The Ohio State University.

Haurin, Donald R., Toby L. Parcel and R. Jean Haurin (2002). “Does Homeownership Affect Child Outcomes?” Real Estate Economics, Vol. 30, No. 4, pp. 635-666.

Haurin, Don and Hazel Morrow-Jones. 2006. The Impact of Real Estate Market Knowledge on Tenure Choice: A Comparison of Black and White Households. Housing Policy Debate. 17(4): 625-654.

Herbert et al. 2005, Homeownership Gaps Among Low Income and Minority Borrowers, Available online at:

Hilber, Christian A.L. and Yingchun Liu. 2008. Explaining the black–white homeownership gap: The role of own wealth, parental externalities and locational preferences. Journal of Housing Economics. 17: 152-174.

Hirad, Abdighani and Peter M. Zorn. 2002. Pre-purchase Homeownership Counseling: A Little Knowledge is a Good Thing. Low Income Homeownership: Examining the Unexamined Goal. N. P. Retsinas and E. S. Belsky. Washington DC, The Brookings Institute: 146-174.

Laderman, Elizabeth and Carolina Reid. 2009. CRA Lending During the Subprime Melltdown. Revisiting the CRA: Perspectives on the Future of the Community Reinvestment Act. San Francisco Federal Reserve Bank. Available online at:

Lax, Howard, Michael Manti, Paul Raca and Peter Zorn. 2004. Subprime lending: An investigation of economic efficiency. Housing Policy Debate 15(3): 533-71.

McCarthy, George, Shannon Van Zandt and William Rohe. 2001. The Economic Benefits and Costs of Homeownership.: A Critical Assessment of the Research. Research Institute for Housing America. Available online at:

Moulton, Stephanie. 2009. Originating Lender Localness and Mortgage Sustainability: An Evaluation of Delinquency and Foreclosure in Indiana’s Mortgage Revenue Bond program. Under Review.

Nelson, Lisa. 2009. CRA Lending in the 4th District. A Look Behind the Numbers. Federal Reserve Bank of Cleveland 2(1).

Quercia, Roberto and Jonathon Spader. 2008. Does Homeownership Counseling Affect the Prepayment and Default Behavior of Affordable Mortgage Borrowers? Journal of Policy Analysis and Management 27(2): 304-325.