Weathering the storm: How have IDA homebuyers fared in the foreclosure crisis?

Abstract

This study is the first to compare the homeownership outcomes of Individual Development Account (IDA) homebuyers with other low-income homebuyers. The IDA homebuyers purchased homes in 16 states with IDA funds between 1999 and 2007. We compare both loan terms and foreclosure outcomes for the IDA homebuyer sample to comparison groups of other low-income homebuyers who purchased homes in the same counties and during the same time period. We find that IDA homebuyers were more likely to receive government-insured loans and less likely to receive high interest rate or subprime loans than other low-income homebuyers. Further, we find that cumulative foreclosure rates for IDA homebuyers were one-half to one-third the rate for other low-income homebuyers in the same communities. Overall, the findings suggest that low-income IDA program participants have fared better in the foreclosure crisis than other low-income homebuyers.