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Homeownership Built to Last

Balancing Access, Affordability, and Risk after the Housing Crisis

edited by Eric S. Belsky, Christopher E. Herbert, and Jennifer H. Molinsky

Publication Year: 2014

The ups and downs in housing markets over the past two decades are without precedent, and the costs—financial, psychological, and social—have been enormous. Yet Americans overwhelmingly still aspire to homeownership, and many still view access to homeownership as an important ingredient for building wealth among historically disadvantaged groups.

This timely volume reexamines the goals, risks, and rewards of homeownership in the wake of the housing bubble and subprime lending crisis. Housing, real estate, and finance experts explore the role of government in supporting homeownership, deliberate how homeownership can be made more sustainable, and discuss how best to balance affordability, access, and risk, particularly for minorities and lowincome families.

Contributors: Eric S. Belsky (JCHS); Raphael W. Bostic (University of Southern California); Mark Calabria (Cato Institute); Kaloma Cardwell (University of California, Berkeley); Mark Cole (Hope LoanPort); J. Michael Collins (University of Wisconsin– Madison); Marsha J. Courchane (Charles River Associates); Andrew Davidson (Andrew Davidson and Co.); Christopher E. Herbert (JCHS); Leonard C. Kiefer (Freddie Mac); Alex Levin (Andrew Davidson and Co.); Adam J. Levitin (Georgetown University Law Center); Mark R. Lindblad (University of North Carolina at Chapel Hill); Jeffrey Lubell (Abt Associates); Patricia A. McCoy (University of Connecticut School of Law); Daniel T. McCue (JCHS); Jennifer H. Molinsky (JCHS); Stephanie Moulton (Ohio State University); john a. powell (University of California–Berkeley); Roberto G. Quercia (University of North Carolina at Chapel Hill); Janneke H. Ratcliffe (University of North Carolina); Carolina Reid (University of California–Berkeley); William M. Rohe (University of North Carolina at Chapel Hill); Rocio Sanchez-Moyano (JCHS); Susan Wachter (University of Pennsylvania); Peter M. Zorn (Freddie Mac)

Published by: Brookings Institution Press

Front Cover

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Title Page, Copyright

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Table of Contents

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pp. v-vi

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Acknowledgments

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pp. vii-viii

A book exploring so important and complex a topic as the sustainability of homeownership in the wake of the housing crisis requires the insights and talents of many. We count ourselves fortunate to have worked with such dedicated and adept authors, funders, advisers, and staff in the process of producing Homeownership Built to Last. ...

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Introduction: Balancing Access, Affordability, and Risk after the Housing Crisis

Jennifer H. Molinsky, Eric S. Belsky, Christopher E. Herbert

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pp. 1-28

The ups and downs in U.S. homeownership over the last two decades are without precedent. Though the first few years of the millennium brought the highest homeownership rate the nation had ever seen, they were followed by a half decade of devastating foreclosures in which millions saw their hopes of building wealth through homeownership dashed. ...

Part I: Making the Case for Homeownership as a Policy Goal: Has the Experience of the Housing Bust Changed the Calculus?

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1. Homeownership, Wealth, and the Production of Racialized Space

john a. powell, Kaloma Cardwell

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pp. 31-49

One of the hard-won insights of the twentieth century is that race—and the stratification experienced with it—is a social construct. Although this concept is still contested, it has gained currency even among conservatives, including members of the Supreme Court. What is less explored is how race is constructed and what might be done to reconstruct it. ...

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2. Is Homeownership Still an Effective Means of Building Wealth for Low-Income and Minority Households?

Christopher E. Herbert, Daniel T. McCue, Rocio Sanchez-Moyano

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pp. 50-98

In many respects the notion that owning a home is an effective means of accumulating wealth among low-income and minority households has been the keystone underlying efforts to support homeownership in recent decades. The renewed emphasis in the early 1990s on boosting homeownership rates as a policy goal can be traced in no small part to the seminal work by Oliver and Shapiro and by Sherraden, ...

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3. Reexamining the Social Benefits of Homeownership after the Foreclosure Crisis

William M. Rohe, Mark R. Lindblad

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pp. 99-140

The recent foreclosure crisis and ensuing economic recession have been unprecedented in modern times. The loss of wealth due to the decline in value of real estate has been dramatic. Between 2006 and 2011 house prices fell more than 30 percent nationally, wiping out over $8 trillion in home equity.1 ...

Part II: Supporting the Home-Buying Process: Understanding Consumer Preferences and Designing Homebuyer Programs

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4. To Buy or Not to Buy? Understanding Tenure Preferences and the Decisionmaking Processes of Lower-Income Households

Carolina Reid

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pp. 143-171

I am sitting on the lawn of a modest single-family home in Albuquerque, helping a toddler put together her Mega Bloks® as I talk with her mother, a twenty-four-year-old Latina who has lived in the United States her entire life. We are taking advantage of an unusually warm February day, and the interview is going better now that we are at her home rather than sitting in the nearby public library. ...

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5. Developing Effective Subsidy Mechanisms for Low-Income Homeownership

J. Michael Collins

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pp. 172-202

Homeownership has captured the attention of policymakers across the world in recent years, and this attention has often been negative. Bank failures based on failed home mortgages and a nearly global housing recession have raised difficult questions about the viability of pro-ownership public subsidies. ...

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6. Filling the Void between Homeownership and Rental Housing: A Case for Expanding the Use of Shared Equity Homeownership

Jeffrey Lubell

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pp. 203-228

Most discussions about expanding access to homeownership take as a given that we know exactly what homeownership is. The questions then usually fall into a predictable pattern: What are the risks and benefits of homeownership? How might it be expanded, and what are the costs and benefits of the different options for doing so? ...

Part III: Assessing and Mitigating Risk

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7. Underwriting Standards, Loan Products, and Performance: What Have We Learned?

Marsha J. Courchane, Leonard C. Kiefer, Peter M. Zorn

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pp. 231-266

The mortgage market crisis of the past decade led to many changes in the structure of the industry and in the products being offered to borrowers. The beginning of the 2000s witnessed a surge in nonprime lending with an attendant proliferation of new products, including many that allowed borrowers who could not meet traditional underwriting standards to obtain home mortgages and achieve homeownership. ...

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8. Access and Sustainability for First-Time Homebuyers: The Evolving Role of State Housing Finance Agencies

Stephanie Moulton, Roberto G. Quercia

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pp. 267-289

State Housing Finance Agencies (HFAs) entered the homeownership policy scene in the early 1970s through the sale of tax-exempt mortgage revenue bonds, which HFAs would then pass along as an interest rate savings on mortgages to qualified low- and moderate-income (LMI) first-time homebuyers. ...

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9. Mortgage Default Option Mispricing and Borrower Cost Procyclicality

Andrew Davidson, Alex Levin, Susan Wachter

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pp. 290-314

This chapter examines the impact of mortgage supply characteristics on both housing affordability and financial risk outcomes in the wake of the mortgage crisis. A hallmark of the crisis was a shift toward nontraditional mortgage lending products. What impact did this have on consumers, investors, and the financial system? ...

Part IV: The Government's Role in the Evolving Mortgage Market

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10. Rethinking Duties to Serve in Housing Finance

Adam J. Levitin, Janneke H. Ratcliffe

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pp. 317-350

If the housing crisis has had a silver lining, it is the opportunity to rethink our housing finance policy. The U.S. housing finance system and its regulation evolved to address particular crises and problems—the Great Depression, the postwar housing crunch, the 1960s budget crises, redlining, the savings and loan crisis—rather than as a planned, comprehensive system.1 ...

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11. Dual Mortgage Markets: What Role Has the Government Played and How Likely Will One Emerge in the Future?

Raphael W. Bostic

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pp. 351-371

Dual mortgage markets are a direct descendant of key policy responses to the Great Depression. Before the Depression, nearly all mortgages were five-year balloons, so that homeowners needed to refinance their mortgage every five years. The capital crisis of the Depression limited the ability of households to find new credit when their mortgages reached maturity, which resulted in massive foreclosures. ...

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12. The Role of Mortgage Finance in Financial (In)Stability

Mark Calabria

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pp. 372-394

Empirical research on the causes of financial crises has grown in recent decades.1 Early work, such as that by Kaminsky and Reinhart, helped establish the link between asset prices and banking crises.2 While this initial research focused on equity prices, subsequent research expanded the analysis to include residential property prices. ...

Part V: Sustaining Homeownership

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13. Engaging Distressed Homeowners

Mark Cole

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pp. 397-417

For most families, a central part of the American Dream has been the goal of homeownership. In 2004 consumer attitudes, public policy, and the private sector were all integrally involved in driving the rate of homeownership to a record high of 69 percent.1 The prevailing opinion was that homeownership was a sound economic investment and that it built stronger families and enriched community life. ...

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14. The Home Mortgage Foreclosure Crisis: Lessons Learned

Patricia A. McCoy

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pp. 418-464

From 2007 through 2011, the United States housing market suffered from a severe imbalance in supply and demand.1 On the supply side, there were too many homes for sale, and too many of those listings were for foreclosed homes. In addition, there were several million homes awaiting sale in the foreclosure pipeline.2 ...

Contributors

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pp. 465-468

Index

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pp. 469-487

Back Cover

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E-ISBN-13: 9780815725657
E-ISBN-10: 0815725655
Print-ISBN-13: 9780815725640
Print-ISBN-10: 0815725647

Page Count: 487
Publication Year: 2014

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Subject Headings

  • Home ownership -- United States.
  • Mortgage loans -- United States.
  • Housing -- United States -- Finance.
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