The first home mortgages in this country were offered not by banks but by insurance companies; like many of today’s subprime loans, they were not very friendly for the average consumer. Those first loans were often short-term loans with balloon payments or interest-only loans that left families in a constant cycle of trying to refinance. Many families unable to pay off those balloon payments lost their homes to foreclosure to the insurance companies.
That system continued until the Great Depression, when lenders had no money to lend and borrowers had no money to pay. The whole housing finance system collapsed as thousands of properties foreclosed. Mortgages were just not available.
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- Until 1950, renters outnumbered homeowners. The homeownership rate since then has steadily risen to today’s level of almost 69 percent.
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- According to researcher William Collins, “The racial gap in the home ownership rate was nearly the same in 2000 as it was in 1900, approximately 25 percentage points…it is notable that the vast majority of black-white convergence in ownership and housing values occurred before the federal Fair Housing Act and related antidiscrimination policies.”
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- When low-income families with children have high housing expenses (more than 50 percent of income), they spend 30 percent less for food, 50 percent less for clothes, and nearly 70 percent less for healthcare than their counterparts with low housing outlays.
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- From 2004 to 2006, an estimated 2,500 banks, thrifts, credit unions, and other single-family lenders made a combined $1.5 trillion in high-interest-rate subprime loans. Although subprime mortgages are only 13 percent of all mortgages, they account for 50 percent of foreclosure starts. Adjustable-rate subprime mortgages account for only six percent of mortgages but 40 percent of foreclosures.
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- It is estimated that 2.2 million families will lose or have lost their homes to foreclosure because of reckless subprime lending, including one out of every five subprime mortgages made in 2005 and 2006. The losses associated with those foreclosures, if not averted, will total $265 billion in wealth lost by American families not facing foreclosure.
Read more factsThe Case-Shiller index of home prices in 10 major metropolitan areas showed an 11.4 percent decline in home prices of the past 12 months ending January 2008.
- Cooperative housing is viewed as the ideal “starter home” for a family of four earning $25,000 to $50,000 annually and can be used as a steppingstone for more-traditional homeownership forms. The United States now has more than 1.5 million units in cooperative housing communities, many of them in large metropolitan areas such as New York, Chicago, Miami, and Washington, DC.
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- One-third of U.S. households, or more than 36 million families, rent their homes. There is no county in the country where a full-time, minimum-wage worker can afford even a one-bedroom apartment at fair-market rents.
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- The minority share of renter households climbed from 37 percent in 1995 to 43 percent in 2005 and is expected to exceed 50 percent by 2015.
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- Manufactured housing provides affordable housing for approximately 17 million Americans. Slightly more than half of manufactured-housing occupants are employed full time and have median annual incomes less than $30,000.
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- Establish a community economic development fund within the FHLB System, analogous to the Affordable Housing Program (AHP) by modifying the FHLBs’ RefCorp payment obligation.
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- Add shared-equity homeownership to the underserved market definitions for the government sponsored enterprises (Fannie Mae, Freddie Mac, and the FHLB System). Require the GSEs to lead the industry in duplicating mortgage bundling and secondary mortgage purchases of land trust housing, housing cooperatives, and limited equity condominiums.
Read more recommendations(Currently, the GSEs “bundle” shared equity mortgages only in Washington, DC and New York City). This will position shared-equity housing on a par with single-family homes as “portable assets.”
- Preserve Low Income Housing Tax Credit (LIHTC) properties nearing expiration (year 15) by providing new LIHTC allocations to restructure expiring-use properties;
Read more recommendationsfacilitating the appropriate use of reserves through year 15, not just in middle years; and requiring that a soft junior loan (e.g., a nonamortizing, low- or no-interest cash flow loan) not have a repayment trigger when the property is sold or refinanced.
- Establish a federal second-mortgage tax credit. Lenders would receive tax credits to provide no-interest loans to low wealth families, making first mortgages affordable and addressing both the wealth and income constraints to homeownership.
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