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Category Archives: Assessing Impact of Housing Policies & Programs

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…


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…


State Policy Solutions to the Short Supply of Housing

When it comes to a lack of affordability in housing, it’s no secret that California is outpacing the nation. Average home prices are about two and half times more expensive than the rest of the country, and rents are about 50 percent higher. A shortage in supply is a key contributing factor, and we need both public policy and private sector solutions that will help expand housing production to better meet demand. This week, the Terner Center is sharing an analysis of one important avenue to meeting this challenge in California: improvements to state land use regulations to promote an…


Why By-Right Affordable Housing in California is the Right Thing to do

Posted on by Carol Galante

The following piece was originally drafted as a letter of support for Governor Jerry Brown’s proposed legislation to streamline local housing approvals. The original letter, with citations, can be found here.   The Permit Streamlining Act. On May 13, 2016, Governor Jerry Brown proposed a change to state law that would streamline affordable housing proposals and spur much needed housing production. Introduced as a part of the administration’s May Revision to the 2016-17 Budget, the by-right bill would effectively change the way local jurisdictions approve housing projects. In doing so, Brown has acknowledged that in order to facilitate more building throughout…


Federal Housing Administration Delivers Success

Posted on by Carol Galante

Today, the Federal Housing Administration (FHA) delivered its Annual Report to Congress and the report demonstrates that FHA met and exceeded the 2% capital reserve requirement for the Mutual Mortgage Insurance Fund (MMIF) and improved the Fund value by over $40 billion since it went negative in fiscal year 2012. This good news validates that the policies put in place by FHA over the last 7 years have enabled FHA to strengthen its financial position while also strengthening the economy and providing access to mortgage credit to millions of families. The FHA team deserves tremendous credit for this achievement. The…


On Housing, Good News for Families and Communities

Posted on by Carol Galante

President Obama’s announcement that the Federal Housing Administration will lower the cost of its home loans by one-half of a percentage point (.50 basis points) should be very welcome news. Home loans will now be within reach for many more hard working and responsible families who have been left on the sidelines of the economic recovery. This cost reduction is good for homeowners and would-be homeowners, communities still struggling to recover from the recession, and the economy more generally. The National Association of Realtors reports the first-time homebuyer has been largely absent during the economic recovery. The inventory of homes…