Subprime and the Myth of Increasing Homeownership

Alyssa Katz notes that a couple analyses show that the increase in foreclosures caused by subprime mortgages more than outweighed the new first-time homeowners it generated.

“So please, no more of this ‘don’t forget that subprime helped more people become homeowners’ crap — it didn’t,” she says.

She’s right, of course. But where and how should we fit CDC and CDFI lending into this picture? By some people’s accounting, some of the responsible, well-vetted, and (at least until this year) well-performing loans made by community groups would also be considered subprime by their LTV ratios or other measures.

Should they get a pass, and maybe a different term? Certainly they were not the root problem of this crisis, and the clamp-down on credit terms is hampering what many see as the best revitalization strategy available.

But, while they were not fraudulent, badly underwritten hard sells, did those loans still push some people into homeownership who weren’t ready? Are >100% LTV ratios (just as an example) something that CDCs can wield successfully while others can’t, or is it better for everyone if they stay gone for good?

Miriam Axel-Lute is CEO/editor-in-chief of Shelterforce. She lives in Albany, New York, and is a proud small-city aficionado.


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