Regaining the Dream

Regaining the Dream: How to Renew the Promise of Homeownership for America's Working Families

ROBERTO G. QUERCIA
ALLISON FREEMAN
JANNEKE RATCLIFFE
Copyright Date: 2011
Pages: 160
https://www.jstor.org/stable/10.7864/j.ctt127x01
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  • Book Info
    Regaining the Dream
    Book Description:

    Millions of Americans have lost their homes since the start of the recession initiated by the financial crisis of 2008-09. But is the dream of homeownership for America's working families obsolete, an aspiration from a bygone era?Regaining the Dreamrejects that notion and proposes a way to strengthen the financial system while simultaneously promoting an equitable and viable American homeownership policy.

    For the first time, the authors ofRegaining the Dreamoffer data-driven evidence on how the mortgage industry can serve working families in the United States, pointing the way to a pragmatic housing policy that promotes the opportunity for sustainable homeownership.

    Taking the reader step by step through the lending crisis and what caused it, the authors include useful and clear definitions of terms heard almost daily in news coverage. And they give a fair account of the history behind Fannie Mae and Freddie Mac and the new Dodd-Frank law, explaining what remains to be done to uphold one of the defining characteristics of the American dream.

    eISBN: 978-0-8157-2173-4
    Subjects: Business, Political Science, Finance

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Foreword
    (pp. vii-xiv)
    Frank F. DeGiovanni and George McCarthy

    This book describes an astonishing journey that began in 1998. That was the year in which the Ford Foundation, Fannie Mae, and a small group of banks subscribed to the vision of an audacious nonprofit organization in North Carolina that set out to make homeownership possible for low-income renters, to reduce the racial wealth gap, and to make a fair profit for primary lenders, secondary market institutions, and itself in the process. The organization—Self-Help Ventures Fund—convinced each of the parties to join it in a demonstration to enable at least 40,000 low-income and minority households to become homeowners....

  4. Acknowledgments
    (pp. xv-xvi)
  5. 1 Foreclosing on the American Dream
    (pp. 1-12)

    Millions of families have lost their homes since the start of the Great Recession in 2008. By mid-2010, 4.6 percent of all mortgage loans in the United States were in foreclosure, three times the rate of foreclosure at the height of the Great Depression of the 1930s.¹ Working families were left to pay for the recklessness of a market run amok, and they continue to do so through the loss of their homes, unrelenting unemployment, and stagnant wages. After the failure of more than 150 banks, the loss of over $7 trillion in homeowners’ equity, and a global credit freeze,...

  6. 2 Promoting Sound, Equitable Homeownership
    (pp. 13-33)

    Since America’s founding, owning property has been considered the distinctive characteristic of full citizenship. In twelve of the original thirteen states, only property-owning white males could vote, a requirement that restricted the franchise to 10 percent of the adult population. Moreover, the majority of those who could vote couldn’t hold an elected position because they didn’t own enough property. Similarly, in many states, only property owners could sit on juries and engage in other civic activities.

    As the American democracy matured, the property-owning requirements for full civic participation slowly disappeared, and owning one’s home became seen as a civic virtue...

  7. 3 Explaining the Shadow Mortgage System
    (pp. 34-66)

    To understand the benefits of community reinvestment lending, we need to understand how it differs from another form of lending that has targeted low-income and minority communities: subprime lending. We use the termsubprimefor the industry that makes, sells, and securitizes loans that do not meet the criteria of prime, or A-grade, loans. Subprime lenders make mortgage loans to B-grade and C-grade borrowers, who are considered less likely than A-grade borrowers to repay their loans. From the get-go, lenders and investors designated subprime loans as nonconforming, which means the government-sponsored enterprises Fannie Mae and Freddie Mac could not securitize...

  8. 4 Lending for the Long Term
    (pp. 67-88)

    Community reinvestment lending and subprime lending have some similarities. Both make mortgages available to families that previously had limited access to credit typically because of insufficient income or low credit scores; lower income and minority households in particular benefited from Community Reinvestment Act (CRA) lending. Our research shows, however, that the two kinds of lending have very different outcomes. Community reinvestment mortgages, such as those in the Community Advantage Program (CAP), have significantly lower rates of default than subprime loans. The big question is why; what accounts for the sharp differences in the results of subprime and community reinvestment lending?...

  9. 5 Stress Testing Community Reinvestment Lending
    (pp. 89-97)

    The Community Advantage Program study began as an effort to examine whether lending to lower income borrowers was a viable undertaking, from the perspectives of the lending institutions, the secondary market, and the borrower households. However, the continuing economic crisis has given us the chance to assess the costs and benefits of lower income homeownership not just in a time of steady house price gains but also throughout a full business cycle, including a dramatic economic downturn.

    Having followed thousands of lower income homeowners closely, we were in an ideal position to assess precisely how such owners were affected by...

  10. 6 Ensuring Sustainable Homeownership
    (pp. 98-109)

    We demonstrate in previous chapters that people with access to carefully designed mortgages do in fact experience what the Community Advantage Program was meant to accomplish: increased wealth, improved credit, and most important, sustained homeownership. We also examine some of the concrete benefits that homeownership provides to lower income families. Now we turn to the question of how these families can purchase a home—and remain in that home—as long as they want to. How can lower income people be given a chance to enjoy the same long-term benefits of homeownership—shelter, equity gains, and increased wealth—that higher...

  11. 7 Bringing Community Reinvestment Lending to Scale
    (pp. 110-122)

    Throughout this book, we describe the elements that allowed low-and moderate-income families to enter into sustainable homeownership through the Community Advantage Program. In a narrow sense, this was achieved by providing borrowers with carefully underwritten, fixed-rate loans that they could afford to repay over time. The key to CAP’s success, that is, the careful matching of affordable product with borrower, is documented in these pages and in the work of others.

    But CAP’s success would not have been possible without the broader mechanisms and structures that allowed the program to be created and then sustained over time. In this chapter,...

  12. 8 Regaining the Dream
    (pp. 123-136)

    It is difficult to envision a stable future in the middle of a crisis. Yet the only way out of the crisis is to identify and reinforce the elements of the financial system that will increase stability and access in the housing finance market. In chapter 7 we describe the ways in which community reinvestment efforts such as CAP might be brought to scale, including the creation of a national credit enhancement mechanism, the need for supportive secondary-market functions, and the maintenance of systemic stability.

    Now we turn to the core elements of a housing finance policy that will enable...

  13. Notes
    (pp. 137-148)
  14. Index
    (pp. 149-160)
  15. Back Matter
    (pp. 161-161)