Alan Mallach, a visiting scholar for the Federal Reserve Bank of Philadelphia, made the case for a future U.S. housing policy that still supports homeownership for low- to middle-income families but also focuses on quality over quantity. The Financial Crisis Inquiry Commission released its report last week blaming Wall Street and regulators for ignoring early problems in mortgage lending that sparked the crisis in 2008. One dissenting member of the commission, Peter Wallison, put out his own report blaming an overreaching housing policy that pushed the need for subprime and other risky loans. Mallach lands somewhere between the two. He addresses problems with both industry-wide lending practices and a policy in need of revision. "Few people in 2009 still defend many practices that were widely seen as acceptable and even socially desirable only a few years ago," Mallach wrote. "[I]t becomes particularly important to focus not on homeownership per se but on stable homeownership, since a spell of homeownership of only short duration is unlikely to yield the social or economic benefits of a more extended spell of homeownership." One of his arguments against past policy was his study of the probability of a home appreciation by the time a homeowner decides to resell, challenging one of the pillars of homeownership: that it is one of best investments someone can make (see chart below). He notes that for homes purchased between 2006 and 2008, the probability of it appreciating is zero. Mallach said someone who purchased a home in Boston in 1987 had a slightly better than 50% chance of achieving 3% annual appreciation by 2010. A Chicago homeowner would expect a similar level of appreciation over that time, while a Las Vegas homeowner had greater odds of seeing the value of their home decrease. Between 2001 and 2009, 11 million lower-income households, or 1.2 million per year, received a mortgage to purchase a home. In 2009, these households accounted for 34% of all originations, the highest level in a decade. This Mallach said shows "the tighter underwriting standards imposed since the bursting of the bubble have not disproportionately affected lower-income buyers." As the Treasury Department's paper on the future of housing finance lingers past the Jan. 31 deadline imposed by the Dodd-Frank Act, how the Department of Housing and Urban Development, Fannie Mae and Freddie Mac will support housing is still up in the air. Mallach suggested meaningful homeownership education and counseling should play a significant role going forward, but publicly subsidizing downpayments and closing costs need to be re-examined. While he doesn't push for getting rid of these efforts, a "dispassionate review" should be conducted. He concludes that whatever the future holds for housing finance, it will require new developments in mortgage products and support programs. While there is no need for more public resources, he said, regulators must take up a more heavy-handed role in governing this new marketplace. "At the same time, it will require constant regulatory vigilance, as well as ongoing education and marketing, to ensure that new forms of predatory practice do not emerge to replace the ones that have undone the hopes of millions of homeowners and destabilized so many of America’s neighborhoods," Mallach said. Write to Jon Prior. Follow him on Twitter: @JonAPrior