The accumulation of lender-owned homes during the US mortgage crisis: examining metropolitan REO inventories

A key concern among policymakers and community developers in recent years has been the extent to which lender-owned homes, often called real estate owned or “REO” properties, accumulate in different local housing markets during the mortgage crisis. This paper describes the accumulation of REO properties in 356 metropolitan statistical areas (MSAs) from August 2006 to August 2008. It examines differences in both changes and static levels of REO activity across MSAs and compares changes in REO levels to changes in home values over the same period. Special attention is paid to 12 large MSAs with substantial levels of REO as of August 2008. A model of REO volume at the metropolitan level is estimated that includes differences in state foreclosure legal processes and timing among the independent variables. Finally, cluster analysis is used to identify a simple typology of MSAs based on REO levels and home price changes.     

Originating lender localness and mortgage sustainability: an evaluation of delinquency and foreclosure in Indiana's mortgage revenue bond program

Originating lenders play a vital role in selecting and preparing borrowers for homeownership, directly and through partnerships with community entities. While previous research demonstrates the importance of originating lenders for mortgage access to low- and moderate-income borrowers, this analysis evaluates the influence of the originating lender, and in particular the localness of the lender, on mortgage sustainability (reduced delinquency and foreclosure). Employing data on more than 5,000 low- and moderate-income borrowers participating in Indiana's Mortgage Revenue Bond (MRB) program from 2004–2006, this analysis finds that the localness of the originating lender is significantly predictive of mortgage sustainability. After controlling for borrower, mortgage, and market characteristics, an increase in the localness of the lender is associated with a decrease in the probability of delinquency and foreclosure, particularly for higher risk (lower credit score) borrowers participating in the MRB program.     

The impact of assisted housing developments on concentrated poverty

Abstract

The common wisdom is that assisted housing developments have both a direct and an indirect impact on concentrated poverty. The indirect effects are based on the notion that the negative stereotypes associated with such developments spill over into the surrounding neighborhoods, causing people who can leave to do so or avoid the neighborhood and leaving behind only the more disadvantaged segments of society. An increase in concentrated poverty in the neighborhood surrounding the development results. Prior studies, relying on aggregated data, are consistent with this thesis. The overwhelming majority of the statistical models in my study, however, found these relationships to be spurious. Once individual and macrolevel characteristics were controlled for, the relationships disappeared.

These findings imply that assisted housing developments will not typically contribute to concentration of poverty in surrounding neighborhoods and suggest that much of the negative reaction to assisted housing developments is unwarranted.     

Institutionalized social skill and the rise of mediating organizations in urban governance: the case of the Cleveland Housing Network

In this paper we build on an expanding literature that attempts to understand the changing organizational and institutional dimensions of contemporary urban governance. We do so by utilizing the Cleveland Housing Network as a lens through which salient characteristics of contemporary governance become visible. Doing so enables us to highlight the distinctive challenges of the multi-institutional nature of contemporary governance arrangements and “heterarchic” governance in particular. These challenges situate mediating organizations as central components of governance arrangements. Finally, by focusing on the distinctive characteristics of the organization's leaders, we demonstrate that mediating organizations are usefully thought of as institutionalized forms of the “social skill” of institutional entrepreneurs.     

The Financial Viability of Housing for Mentally Ill Persons

Abstract

Although persons with serious mental illness experience significant unmet housing needs, basic information on how housing is successfully financed, developed, and operated for them is lacking. It is possible that standard housing rules of thumb may not apply to this population. (For example, community opposition may raise development costs.) This lack of information may be a stumbling block to policy makers, planners, and developers.

This article attempts to close the gap by examining the financial profile of 153 properties developed for persons with serious mental illness by five nonprofit housing corporations between 1988 and 1992. Our analysis suggests that although this housing may require more management attention, it is not fundamentally different from market‐rate housing for low‐income tenants. After more than 10 years, the nonprofit housing developers continue to thrive, and virtually all of the properties continue to serve persons with mental illness, demonstrating that such housing can be successfully developed and operated.     

Comment on Michael A. Stegman,Walter R. Davis,and Roberto Quercia's “The Earned Income Tax Credit as an instrument of housing policy”

Abstract

The article by Stegman, Davis, and Quercia is a careful, comprehensive analysis of the current impact of the Earned Income Tax Credit (EITC) on the housing cost burdens of working families. Its major proposal, a graduated supplement to the EITC to reflect housing costs, is compared with my broader concept of addressing severe cost burdens through supplements to major income support programs. Criticisms of my concept, chiefly administrative difficulties and incompatibility with the EITC benefit structure, are discussed.

My primary concerns are that Stegman, Davis, and Quercia's proposal does not sufficiently target families with severe housing costs and that the formula for calculating the additional benefit does not reflect diverse housing costs throughout the country and provides the smallest increases to the recipients with the lowest incomes. However, it is more important to generate discussion of the reality that “income policy IS housing policy” than to argue about details.     

Comment on Martin D. Abravanel's “Public knowledge of fair housing law: Does it protect against housing discrimination?"—Organize! the limits of public awareness in ensuring fair housing

Abstract

Public awareness may contribute to enforcement of fair housing law. But available resources would be more productively used if they were invested directly in more aggressive and innovative law enforcement activities. Emerging debates over land use practices, particularly those pertaining to sprawl and affordable housing, may create new avenues for fair housing activity. The overriding challenge for the fair housing community, however, is to organize an effective constituency that can demand greater attention to education, enforcement, or other actions to achieve fair housing goals.     

FHA in the Great Recession: Rebalancing Its Role

The Federal Housing Administration's (FHA) Mutual Mortgage Insurance Fund has a negative net worth as of FY2012, partly because of the weak economic recovery and partly because its policy has been directed to supporting homeownership at the risk of incurring more defaults. Although recently announced reforms should reduce losses, higher insurance premiums and lower loan-to-value ratios will still be necessary. But FHA faced and survived similar situations before, and should be able to do so again, without draconian limitations on its authority.     

Does Homeownership Protect Individuals From Economic Hardship During Housing Busts?

ABSTRACT

Does homeownership protect individuals from experiencing economic hardships even during housing busts? Does the relationship differ by race and ethnicity? Using the Survey of Income and Program Participation 2008 panel in the United States and controlling for income and various family characteristics, we find that the likelihood of experiencing any hardship is 5.6 percentage points lower for homeowners than for renters without rent subsidies, a reduction of about 25%. Owning a home for more than 10 years provides more protection than owning a home for less than 4 years. Homeownership’s role in shielding people from economic hardship is significant not only for non-Hispanic whites, but also for non-Hispanic blacks and Hispanics. The negative relationship of homeownership to economic hardship offers additional evidence that it is beneficial to own your home, even during housing busts and even for households of color.