Closing the Gap: Minority Low and Moderate Income
First Time Homebuyers and Neighborhoods
Stephanie Moulton, PhDRoy Heidelberg
John Glenn School of Public AffairsThe Ohio State University
Blaine Brockman, JDOhio Housing Finance Agency
Overview1. The State of Homeownership
• Homeownership trends & gaps• Strategies to close the gaps
• Subprime boom and bust• Affordable mortgage programs
2. Affordable Homeownership & Minority Borrowers
• Appropriately targeted?• Movement to opportunity?
3. Concluding Thoughts & Next Steps• Importance of institutions supporting affordable mortgage
products• Limits of homeownership
Why Gaps in Homeownership?
1. Income, Wealth & Credit Constraints
2. Household Formation
3. Location Preferences
4. Information Constraints (lack of information about process)
5. 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
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
• 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 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.
All OHFA Purchases (MRB)
Minority OHFA Purchases (MRB)
Total purchases by low-income, minority households
(neighborhoods)
Columbus 2008:
All OHFA Purchases (MRB)
Minority OHFA Purchases (MRB)
Total purchases by low-income, minority households
(neighborhoods)
Cleveland 2008 :
All OHFA Purchases (MRB)
Minority OHFA Purchases (MRB)
Cincinnati 2008:
Total purchases by low-income, minority households
(neighborhoods)
Borrowers MSA County Zip Code TractTotal 19,784 92% 81% 38% 17%Non-
Minority 17,575 92% 80% 39% 17%Minority 2,209 97% 92% 30% 13%
Spatial Mobility: do home-purchasers buy where they rent?
Non-minority
17,575 16,169 14,0606,854 2,988
Minority 2,209 2,143 2,032663
287
70%
Data Source: 2006-2008 home purchases through the Ohio Housing Finance Agency First Time Homebuyer Program
Number of Borrowers
% Urba
n
% Minori
ty
% High
School
Median
Income
% chang
e
Median
Value
% chang
e
% Area
Income
Non-Minority
Previous 17,575 70% 8% 84%$44,76
8 $111,7
79 104%
New 17,575 71% 8% 83%$43,62
6 -
2.55%$103,4
26
-7.47
% 100%Minority
Previous 2,209 94% 38% 79%$36,68
9 $92,61
0 83%
New 2,209 95% 32% 81%$39,03
5 6.39%$89,82
9
-3.00
% 87%Note: Differences in tract characteristics between previous and new addresses are statistically significant at p<.05.
% Urbanproportion of the households living in urban areas
% Minorityproportion of residents who are black or Hispanic
% High Schoolproportion of residents over 18 who have completed high school
Median Incomemedian income of the census tract
Median Valuemedian sales price of homes in the census tract
% Area Incomemedian income as percent of the MSA or county (non-MSA tracts only) income
Neighborhood Quality: comparing tract-level characteristics
minority
non-minority
1 1
-6
2-1
6
-2.5 -3
-7.5
Neighborhood change: renter to homeowner
8%
6
4
2
Same as OHFA
-2
-4
-6%
Borrowers
% Area Income % Urban % Minority
% High School
Median Income Median Value
OHFA First Time HomebuyersNon-
Minority 4,807 106% 75% 8% 84% $44,162 $104,899
Minority 657 90% 95% 30% 82% $40,733 $94,331
All Borrowers, Less than 80% AMINon-
Minority 30,883 103% 68% 7% 84% $45,037 $107,283
Minority 3,689 88% 93% 36% 81% $39,013 $91,189
All Borrowers, Less than 115% AMINon-
Minority 50,624 107% 67% 7% 85% $46,888 $112,875
Minority 5,301 92% 92% 32% 82% $41,198 $97,396
Affordable Instruments: comparing OHFA loans with all LMI homepurchases
% More than OHFA purchases
% Less than OHFA purchases
Differences in tract characteristics of purchases by low-income, minority borrowers
All Borrowers, Less than 80% AMIAll Borrowers, Less than 115% AMI
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
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