Roberto G. Quercia, Allison Freeman, Janneke Ratcliffe: Regaining the dream: how to renew the promise of home ownership for America’s working families

Abstract

Since the start of the Great Recession of 2008, millions of American families have losttheir homes, more than 150 banks have failed, and the global credit freeze has led someanalysts to blame ‘‘these economic crises on policies that promoted homeownership ratherthan on the wildly irresponsible financial schemes promoted by Wall Street’’ (p.1). Thecontinuing crisis raises the question: Is the dream of homeownership over for America’sworking families? No. The dream is still alive, says Roberto G Quercia, Allison Freeman,and Janneke Ratcliffe in their new book, Regaining the Dream. If the working poor areprovided with quality affordable loans, they can successfully make the transition fromrenters to homeowners.Regaining the Dream is an evaluation of ‘‘the largest homeownership demonstration inthe United States—the Community Advantage Program (CAP)’’ (p.ix). This project guar-antees the sale of $2 billion worth of nonconforming mortgages to Fannie Mae (a leadingagency in America’s secondary housing market) thereby enlarging homeownership oppor-tunities for low-income and minority families. (Non-conforming mortgages do not meetFannie Mae underwriting guidelines such as credit quality or loan-to-value ratio). Querciaet al. seek to answer two questions: First, do low-income and minority families benefit fromhomeownership? Second, does a homeownership program for low-income and minorityfamilies, like CAP, expose these people to undue stress and risk? Starting in 1999, theUniversity of North Carolina’s Center for Community Capital (Chapel Hill) tracked theperformance of each of the 46,000 affordable home loans involved in the demonstration andinterviewedmorethan2,000ofthehomeownerseveryyearovera6 yearperiod,2003–2009.The CAP demonstration was a success. CAP families experienced a median equityincrease of $23,000 during the recession. Borrowers also proved to be good credit risks:the default rate for CAP borrowers was less than half that of subprime borrowers, 8 versus18%. And, in contrast to expectations, CAP owners were not more likely to exhibit