Low-income and minority borrowers were among the hardest hit as a result of subprime lending that brought on the collapse of the housing market, according a recent study from the Harvard Joint Center for Housing Studies (HJCHS).
Since mortgage markets thrive on the ability of individual borrowers to repay their loans, the study stresses the need for the creation of a responsible mortgage market, one that ensures access to mortgage credit for low-income borrowers.
Part of creating this type of “fairer” mortgage market includes developing liquidity that provides broad access to mortgage credit that borrowers understand and have the ability to pay.
This calls for a return to private capital as the primary source of mortgage funding, the study suggests, with government support being limited, explicit and transparent.
“To ensure access to mortgage capital for low-wealth and low-income borrowers and communities, efforts must continue to eliminate any vestiges of the discriminatory lending that played such a prominent role in the buildup of the recent crisis,” writes the study’s lead author William Apgar.
A senior scholar at HJCHS and former Federal Housing Administration (FHA) commissioner, Apgar does not believe that accomplishing the goals set forth in the study will be easy, let alone quick, as it took years to create today’s complex system.
“Moving forward, trial and error will be necessary in designing the new products, new organizational structures, and new oversight mechanisms that will define tomorrow’s mortgage market,” writes Apgar.
Written by Jason Oliva
