Terner Center Blog: No Limits

Too Big to Hide: The Importance of Public Data on the Mortgage Market

Posted on by Carolina Reid and Echo Bergquist

Fair lending is the foundation of a thriving economy, both locally and nationally. Access to credit drives home purchases, revitalizes neighborhoods, and allows families to build wealth for future generations. Since the financial crisis, however, tighter credit standards have made it increasingly difficult to obtain a mortgage, especially for low-income and minority borrowers.  A key challenge facing policymakers is how to reform the housing finance system in a way that provides access to credit for a broad range of households, yet at the same time ensures that homeownership is sustainable over the long-term.  Striking this balance is critical, not only for addressing the widening racial wealth gap, but also for the strength of the U.S. economy.

But we can’t create thoughtful, effective housing policy – nor assess its outcomes – without comprehensive data that reveals where home loans are being made and to whom.   Fortunately, we have this data thanks to the Home Mortgage Disclosure Act of 1975 (also known as HMDA). HMDA requires banks to report on the mortgage applications they receive, including whether they approve or deny the loan, the terms of the loan, and borrower characteristics. HMDA’s roots are in the Civil Rights movement and are a reaction to redlining. It was designed to increase the transparency of bank lending practices by requiring that lenders disclose loan approvals and denials by borrower race and ethnicity.  Since its passage, HMDA has made it possible for regulators, community groups, academic researchers and investigative journalists to understand lending patterns and behavior. It has shed light on discriminatory lending practices nationwide.

HMDA’s value goes beyond providing needed transparency in lending: it is also a finger on the pulse of the U.S. economy.  Mortgage debt is by far the largest component of household debt in the United States, meaning that understanding its ebbs and flows is vital to macroeconomic policy.  For example, researchers use HMDA data to analyze whether borrowers are taking advantage of lower interest rates to refinance their homes, which can speak to the effectiveness of the Federal Reserve’s monetary policies. HMDA also provides data on Federal Housing Administration (FHA) lending, allowing researchers to assess the FHA’s role in providing critical  countercyclical support during the Great Recession. Researchers have also used HMDA data to understand how access to credit is associated with a wide range of social, political and economic issues. For example, using HMDA data, researchers have been able to examine how various aspects of the mortgage market affect outcomes as diverse as presidential elections and maternal health.

Since its implementation, HMDA has been updated to reflect changing social and economic realities in the United States.  For example, in 2004 as subprime lending rose to prominence in the mortgage market, HMDA was enriched to include information on whether a loan could be considered subprime.

Now, the Trump administration wants to curtail HMDA’s value and public accessibility.  The Department of the Treasury recently recommended that HMDA data be hidden from public view, undermining the essential intent of the law. Equally troubling is the effort to delay implementation of a new final rule established by the Consumer Financial Protection Bureau (CFPB) to modernize HMDA.  Legislators in both the House and Senate have also put forth bills that would severely limit the scope of the data collected.

The Department of the Treasury recently recommended that HMDA data be hidden from public view, undermining the essential intent of the law. Equally troubling is the effort to delay implementation of a new final rule established by the Consumer Financial Protection Bureau (CFPB) to modernize HMDA.

We need HMDA to be publicly accessible.  And we need the new CFPB rule to take effect if we hope to understand today’s mortgage lending market and its impact on our nation’s economic health.  Among the most significant elements of the rule is one which adds greater detail to racial and ethnic designations in HMDA data collection. For example, going forward, the designation “Asian” will be broken out into the subcategories of Asian Indian, Chinese, Filipino, Japanese, Korean and Vietnamese. Why does this matter?  Individuals currently designated as “Asian” are now the fastest-growing racial group in America, but though they represent many different cultures and backgrounds, for the purposes of HMDA they are treated as one group.  With more detailed demographic information, lenders will be better able to understand and serve their communities by, for example, providing materials or financial education translated into the appropriate languages.  

Another small but mighty piece of information that the new rule will bring concerns reverse mortgages. The rule ensures that all reverse mortgages, in which homeowners relinquish equity in their home in exchange for regular payments, will be reportable to HMDA. This simple addition opens up greater possibilities for data-backed policy solutions that can, for example, help seniors stay in their homes.

Though some are concerned that these new reporting requirements will place an undue burden on banks (especially smaller institutions), during the rule finalizing process, the CFPB carefully weighed the reporting burden against the value of the new data for policy-making. In several instances, the CFPB heeded industry suggestions and eliminated or revised proposed requirements to reduce the industry reporting burden. In fact, most of the new reporting requirements—such as credit score—consist of data that are already collected by lenders during the underwriting decision.

Without the knowledge derived from HMDA, we risk undermining evidence-based public policy with ideological positioning and preconceived beliefs. Let us continue to enable effective policy-making through publicly-owned data that allows for a wide range of stakeholders to assess and debate the evidence. Without this basis in facts, we risk producing inefficient outcomes, or worse, exacerbating social inequalities in the housing market.


Jumpstarting the Market for Accessory Dwelling Units

This post originally appeared on the Berkeley Blog on May 23, 2017. It shares insights from our recently released report Jumpstaring the Market for Accessory Dwelling Units: Lessons Learned from Portland, Seattle and Vancouver.   ADU permitting explodes: Permits as a share of all residential permits. How did Portland, Oregon go from permitting two accessory dwelling units (ADUs) per month in 2009 to almost two per day in 2016?  Now, more than one of every ten housing units built in Portland is an ADU. Compared to other housing types, ADUs, or separate small dwellings embedded within single family properties, are…


Highlights from the Terner Center Promoting Affordability Conference

Though U.S. cities like Boston, New York, San Francisco and Los Angeles are important engines of the American economy, their rapid growth in jobs and populations has not been met with a comparable pace of growth in housing. The result? Increasing pressure on both the rental and for-sale housing markets, and skyrocketing costs of living for a larger and larger proportion of the people who live in these cities.  On Thursday June 1, the Terner Center hosted a special convening intended to delve into this issue, exploring solutions to that could help expand the supply of housing, lower the cost…


Rowing in the Same Direction? Aligning Sustainability and Housing Policies, Strategies and Goals

Posted on by Sara Draper Zivetz

Access to quality housing in stable neighborhoods is increasingly recognized as a fundamental building block for individual and family outcomes. Where you live, how much you spend on your housing, and how stable a place it is for you and your family has well-documented effects on economic prosperity, educational attainment, and health and well being, among others. Meanwhile, the location, design and affordability of housing is also deeply tied to issues of environmental justice and climate change. As related but distinct segments of the environmental field, housing and housing policy play an important though often under-discussed role in both issues:…


Balancing the tax code to relieve housing cost burdens

Posted on by Terner Center Team

Of the more than 21 millions renters in the United States who are burdened by the cost of housing today, more than 15 million can not access assistance they are eligible for, because there aren’t enough federal resources to meet their needs. In part, this is a result of skewed tax code that directs significant expenditures to homeowners and other policy priorities, and leaves the housing security and economic mobility of renter families behind.  Amidst emerging conversations about reforming the federal tax code, it is important that we are reminded of this imbalance and seize the opportunity, should there be…


Building Affordability by Building Affordably: the case for Off-site Multifamily Construction

Posted on by Carol Galante and Sara Draper-Zivetz

To remain relevant and successful over time, every industry must modernize and adapt to changing demands and opportunities in the marketplace. The housing development industry is no exception, and over the years, has experienced its fair share of evolutions and revolutions in business model and product design. Today, as housing developers face rapidly changing consumer preferences, population demands, technological advances, and an ever- rising cost of construction, the adage “innovate or perish” may be timelier than ever. How will the housing industry adapt to these new realities? As a recently released report from McKinsey & Company points out, the construction…


Federal Policy Outlook: 2017 and Beyond

Posted on by Terner Center Team
Filed under: Informing the Dialogue,

Since November's federal election, many have been considering what the incoming Administration portends for housing policy and practice in the next four years. Last Tuesday, California Housing Consortium and the Terner Center for Housing Innovation welcomed over 100 people to a panel discussion in Oakland intended to explore this question. The event brought together housing experts Michael Novogradac of Novogradac & Associates, Chris Gouig of Alameda County Housing Authority, Matt Schwartz of California Housing Partnership Corporation, and our Faculty Director, Carol Galante. CHC Policy Director Marina Wiant moderated the conversation, asking questions about tranistions in federal leadership in housing, the nature and implications of impending tax reform,…


Opening Doors to Homeownership Series Part 1: Lease-Purchase

Posted on by Carol Galante, Carolina Reid, Rocio Sanchez-Moyano

A number of recent studies suggest that the American Dream, with its promise of upward mobility, is diminishing for current and future generations as the racial wealth gap grows and access to opportunity shrinks. This troubling trend is most evident in one of the dream’s most potent symbols: homeownership. In recent years, alongside widening inequality, rates of homeownership among young adults and minority families have declined precipitously and, in 2016, the national homeownership rate fell to its lowest level in more than 50 years.  What explains this trend? Working families (and especially lower-income and minority households) seeking to buy their…


Balancing the Burden: Proposing a FAIR Tax Credit for Renters Facing Affordability Challenges

Posted on by Carol Galante, Carolina Reid, and Nathaniel Decker

By most accounts, rents have never been higher. In the United States, over 21 million people see more than 30 percent of what they earn go to rent each month. And over 11 million Americans are paying more than 50 percent of their income to rent their home, leaving little left over for other essentials like healthcare and food, and leaving too many facing a precarious stretch of days until their next paycheck. And this is not just a problem of poverty: because rents have risen faster than incomes, even renters who are working full-time and earning modest wages are…


Housing Highlights from the 2015 American Community Survey

Posted on by Jed Kolko
Filed under: Demographic Trends,

The Census Bureau has just released the 2015 American Community Survey (ACS), the most detailed and comprehensive regular source of housing data for the U.S. and local areas. The housing market continues to ease back toward normal, with a drop in vacancies, an increase in single-family owner-occupied units, and a decline in cost burdens. However, homeownership fell yet again, household formation remains below normal, and more young adults are living with parents (2016 Current Population Survey data). Here are the housing highlights from the 2015 ACS, with more detail available in this slide deck: Homeownership and household formation (slides 3-10): The…