Minority Homeowners Research Articles

Differential disadvantages in the distribution of federal aid across three decades of voluntary buyouts in the United States

Voluntary home buyout programs have gained increasing popularity as a natural hazard mitigation tool over the past couple decades. However, a strong emphasis on the monetary value of disaster mitigation leaves open the possibility of inequity in distribution of the benefits of buyouts that may exacerbate social justice issues under conditions of increasing disaster damages due to climate change. Using a complete dataset of U.S. Federal Emergency Management Agency (FEMA) funded buyout properties we describe the demographic makeup of neighborhoods and counties that have participated in FEMA buyout programs since the 1980s and evaluate differential disadvantages in the chances of receiving a buyout and the amount of money received by buyout participants across characteristics associated with social vulnerability. We find that urban counties with greater resources are more likely to receive funds to administer a buyout program, and that within these counties, minority homeowners are less likely to receive federal aid dollars. In addition, we identify a trend of increasing disparity specifically for Black populations. Our findings suggest that intended objectivity in how voluntary buyout dollars are distributed has led to unintentional inequities at multiple scales that may become more pronounced without changes to existing policy and highlight the growing need for social equity consideration in strategic retreat planning.

There and Back Again: A Commentary on Social Welfare Policy in the Wake of 2020

There and Back Again: A Commentary on Social Welfare Policy in the Wake of 2020

The Determinants of Racial Disparities in Housing Returns

We identify the existence of a racial gap in housing returns that is an order of magnitude larger than disparities arising from housing costs alone. The returns gap is driven almost entirely by differences in distressed home sales (i.e. foreclosures and short sales). Black and Hispanic homeowners are both more likely to experience a distressed sale and to live in neighborhoods where distressed sales carry larger foreclosure discounts. Higher rates of distressed sales among minorities are driven by pre-existing differences in economic stability and neighborhood sorting. Black and Hispanic homeowners are more likely to default in response to increases in monthly payments, consistent with racial differences in liquid wealth holdings playing a key role in creating the observed disparities. We use quasi-experimental variation in the receipt of mortgage modifications to show that policies that encourage lenders to modify loans when homeowners can no longer afford their mortgages can mitigate gaps in housing returns, particularly if they are targeted towards minority homeowners or neighborhoods.

Mortgage characteristics and the racial incidence of default

Previous research has shown that relative to White borrowers, Black and Hispanic borrowers taking out mortgages at the height of the early-2000s housing boom experienced significantly higher delinquency rates. In this paper we attempt to gain a better understanding of the factors that gave rise to these racial differences in mortgage delinquency. Using a database of nearly 3 million mortgages originated between 2005 and 2009, we find that minority borrowers were significantly more likely to have mortgages with high-risk contract characteristics, such as prepayment penalties, payment resets, and terms that limit principal paydown. While much of the racial variation in the prevalence of these characteristics can be explained by common measures of borrower creditworthiness, we also provide evidence that even after conditioning on a rich set of borrower controls, minority borrowers were more likely to have several high-risk mortgage characteristics. Results from mortgage default models and a decomposition exercise show that the concentration of minority borrowers in such loans elevated default rates for Black and Hispanic borrowers by 2 and 4 percentage points, respectively, relative to the default rate for White borrowers. The totality of our results suggest that exotic loan characteristics acted as mortgage default accelerants for many minority homeowners that experienced significant income and equity shocks during the Great Recession.

A Granny Flat of One’s Own? The Households that Build Accessory-Dwelling Units in Seattle’s King County

This paper inserts itself in current debates about the legalization of Accessory-Dwelling Units (ADUs), by casting a new light on the profiles of households filing ADU permits in the unincorporated areas of Seattle’s King County. Correlations between the concentration of minority households and the permitting of ADUs might call into question preconceived notions that such legalizations benefit suburban, older, white middle-class households in the first place. We seek to address the relationship between legalizing ADUs in King County, the major county of the Seattle metropolitan area, and general characteristics of households who build ADUs, based on age, race, and income. Findings underline premises for further evidence about the fact that minority homeowners benefit from the local permitting of ADUs. These findings could be the translation of a particular adequacy between ADU legalization and the long-term projects of local homeowners to transform their residential space.

Heterogeneity in Income: Effects of Racial Concentration on Foreclosures in Los Angeles, California

ABSTRACTThe United States continues to be defined by racial concentration, where most racial/ethnic groups live apart from each other. For homeownership, neighborhoods with large proportions of racial minorities are often linked to negative outcomes for minority homeowners; this was particularly the case during the Great Recession. However, middle and upper income ethnic neighborhoods, or resurgent neighborhoods, have grown in numbers because of a concentration of immigrants, federal policies favoring professionals, ethnic-specific resources, and affluence. In 2007, about 37% of Los Angeles, California, Latino tracts were resurgent and 53% of Asian tracts were resurgent. This study finds that homeowners in resurgent neighborhoods had lower default/foreclosure rates and predicted probabilities than those in low-income neighborhoods. Asian resurgent neighborhoods had the lowest predicted probabilities of default or foreclosure, followed by Latino resurgent and White middle-class neighborhoods. There were also discrepancies among Asian neighborhoods based on nativity. Consequently, it is important to recognize that minority neighborhoods are heterogeneous, with differing impacts on homeownership opportunities when examined by class.

The Vulnerability of Minority Homeowners in the Housing Boom and Bust: Corrigendum

The Vulnerability of Minority Homeowners in the Housing Boom and Bust: Corrigendum

Minority households’ willingness to pay for public and private wildfire risk reduction in Florida

The purpose of this work is to estimate willingness to pay (WTP) for minority (African-American and Hispanic) homeowners in Florida for private and public wildfire risk-reduction programs and also to test for differences in response between the two groups. A random parameter logit and latent class model allowed us to determine if there is a difference in wildfire mitigation program preferences, whether WTP is higher for public or private actions for wildfire risk reduction, and whether households with personal experience and who perceive that they live in higher-risk areas have significantly higher WTP. We also compare Florida minority homeowners’ WTP values with Florida original homeowners’ estimates. Results suggest that Florida minority homeowners are willing to invest in public programs, with African-Americans WTP values at a higher rate than Hispanics. In addition, the highest priority for cost-sharing funds would go to low-income homeowners, especially to cost-share private actions on their own land. These results may help fire managers optimise allocation of scarce cost-sharing funds for public v. private actions.

Mortgage Characteristics and the Racial Incidence of Default

Previous research has shown that relative to White borrowers, Black and Hispanic borrowers taking out mortgages at the height of the early-2000s housing boom experienced significantly higher delinquency rates. In this paper we attempt to gain a better understanding of the mechanisms that gave rise to these racial differences in mortgage delinquency. Using a database of nearly 9 million mortgages originated between 2005 and 2009, we find that minority borrowers were significantly more likely to have mortgages with high-risk contract characteristics, such as prepayment penalties, variable interest rates, balloon structures, and negative amortization periods. Results from mortgage default models and a decomposition exercise show that the concentration of minority buyers in such loans explains a significant fraction of the difference in default rates between racial groups. The totality of our results suggest that exotic loan characteristics acted as mortgage default accelerants for many minority homeowners that experienced significant income and equity shocks during the Great Recession.

The Vulnerability of Minority Homeowners in the Housing Boom and Bust

This paper examines mortgage outcomes for a large sample of individual home purchases and refinances linked to credit scores in seven major US markets. Among those with similar credit scores and loan attributes, black and Hispanic homeowners had much higher rates of delinquency and default in the downturn. These estimated differences are especially pronounced for loans originated near the peak of the housing boom. These findings suggest that black and Hispanic homeowners drawn into the market near the peak were especially vulnerable to adverse economic shocks and raise concerns about homeownership as a mechanism for reducing racial disparities in wealth. (JEL D14, J15, R23, R31, R38)

Emerging Forms of Racial Inequality in Homeownership Exit, 1968–2009

Because homeownership continues to be a key mechanism underlying racial inequality in America, recent developments that led to the foreclosure crisis bring to the forefront issues concerning minority homeowners' ability to sustain ownership. This article uses longitudinal data from the Panel Study of Income Dynamics to examine racial differences in the likelihood of homeownership exit over the last four decades. We find that black homeowners are at a significantly higher risk of transitioning to renter status than are white homeowners, even after accounting for life-course, socioeconomic, and housing characteristics, and the selection into homeownership. Most importantly, we show that the racial gap in ownership exit has widened substantially over time, especially among owners who purchased their homes in the 1990s or later. These findings are consistent with arguments that the nature of racial stratification in U.S. housing markets has shifted over time from overt market exclusion to market exploitation.

Refinancing Trends among Lower Income and Minority Homeowners during the Housing Boom and Bust

This article examines trends in mortgage refinancing activity during the housing boom and bust, with a focus on homeowners in lower income and minority market (LIMM) areas. Unlike any other period in recent history, during the boom LIMM homeowners refinanced their mortgages more frequently than non‐LIMM homeowners. This occurred primarily among borrowers for whom the refinance option was not in‐the‐money, and it is likely attributable to the concurrent growth of subprime, cash‐out refinancing. Following the 2007 mortgage market collapse, however, LIMM homeowners were less likely to refinance. This can be explained in part by systematic differences in home equity levels across borrowers.

Protecting Minority Homeowners: Race, Foreclosure Counseling and Mortgage Modifications

AbstractMillions of minority homeowners are at risk of losing their homes as a result of the housing crisis due to mortgage foreclosure and home repossession. One consumer‐oriented policy response to this crisis is mortgage default counseling for borrowers. This study examines the rate at which minority borrowers seek default counseling and the resulting correlation between counseling and the probability that a borrower obtains a modification of his/her original mortgage contract terms. The results suggest that African Americans are more likely to be counseled, relative to Whites. However, Latinos or other non‐White groups are no more or less likely to be counseled. The probability of loan modifications among counseled African Americans is also higher than other counseled borrowers. These results suggest that counseling policies and the public subsidy of default counseling may be one approach for promoting consumer financial well‐being of these households, but also suggest counseling efforts might be better designed for other minority groups. These results also have implications for the application of counseling to other mortgage decisions, such as refinance.

Protecting Homeowners: Foreclosure Counseling Policies and Modifications of Mortgage Terms

Millions of minority homeowners are at risk of losing their homes as a result of the housing crisis due to mortgage foreclosure and home repossession. One consumer-oriented policy response to this crisis is mortgage default counseling for borrowers. This study examines the rate at which minority borrowers seek default counseling and the resulting correlation between counseling and the probability that a borrower obtains a modification of his/her original mortgage contract terms. The results suggest that African Americans are more likely to be counseled, relative to Whites. However, Latinos or other non-White groups are no more or less likely to be counseled. The probability of loan modifications among counseled African Americans is also higher than other counseled borrowers. These results suggest that counseling policies and the public subsidy of default counseling may be one approach for promoting consumer financial well-being of these households, but also suggest counseling efforts might be better designed for other minority groups. These results also have implications for the application of counseling to other mortgage decisions, such as refinance.

Subprime lending over time: the role of race

In light of the increased scrutiny of the subprime market nationally and the concerns raised that low- and moderate-income and minority homeowners are targeted for high-cost loans, this paper examines the extent to which subprime lending occurs in selected states and the role that race plays in obtaining prime versus subprime loans. It focuses on explaining the gap in subprime rates between African–Americans and whites and estimating its change over time (1999 to 2006) for the study states. We use a unique data set comprised of data from several data sources, including loan-level information, which allows for better controls over factors correlated with race so that better inferences can be drawn. Also, an estimating procedure is employed that fine-tunes the influence of race in the allocation of mortgage capital between the prime and subprime markets. After taking into accounts various controls, the results suggest the possibility of bias in mortgage lending for the prioed studied.

The Relationship between Residential Foreclosures, Race, Ethnicity, and Nativity Status

Existing research indicates that minority homeowners are more likely to experience a foreclosure than a white borrower, but despite the importance of immigrants to the owner-occupied housing market, no research has examined the relationship between nativity status and foreclosure. Using a unique data set and binomial logistic regression models, this article examines the relationship between race, ethnicity, nativity status, and foreclosure for a sample of households in Minneapolis, Minnesota. Research results indicate that the relationship between nativity status and foreclosure differs by the race and ethnicity of the household and whether the mortgage was refinanced or for a home purchase.

Mobility and exit from homeownership: Implications for community reinvestment lending

This study focuses on the transition out of homeownership among community reinvestment loan borrowers, documenting patterns among low‐income and minority households. We show that the higher rates of home‐ownership exit documented among low‐income and minority borrowers in the larger population do not hold for community reinvestment mortgage borrowers. We model the transition, separating the determinants of mobility and tenure choice. Our results show that low‐income and minority homeowners are less likely than their high‐income and white counterparts to move, but no less likely to purchase a new home when they do. These findings are contrasted with the results of a model that specifies the transitions out of homeownership as the purchase of a new home and the return to renting.

Unfair Discrimination and Homeowners Insurance Availability: An Empirical Analysis

AbstractThere has been an active public policy debate about the availability and cost of homeowners insurance in urban markets, and insurers have been charged with intentional discrimination, or redlining, against minority buyers and neighborhoods with a large proportion of minority population. Studies of relative price, loss costs, agency location, and product quality have attempted to determine whether insurers unfairly discriminate against minority homeowners in urban areas. This study focuses on insurance availability, and examines whether there is a systematic difference in the breadth of insurance coverage in the market that corresponds to the proportion of minority residents in a state. The market share of dwelling fire insurance polices across states for years 2000 and 2003 is analyzed, and evidence is presented that shows a positive correlation between the proportion of minority homeowners in a state and the share of more restrictive dwelling fire policies. However, this difference is not statistically significant once other risk‐related and economic factors are included in the analysis.

Racial/ethnic differences in housing outcomes for first‐time, low‐income home buyers: Findings from a National homeownership education program

Federal housing policies aimed at making homeownership more accessible through education and affordable lending have been successful in raising the homeownership rate among minorities. By marketing homeownership to underserved populations and helping them overcome financial and informational obstacles, such programs might be expected to promote equality in housing outcomes, including housing quality, neighborhood composition, and neighborhood conditions, for minority homeowners. This article examines the experience of participants in a national home‐ownership education program. While the transition to homeownership has been associated with modest progress, it does not overcome persistent disparities in housing quality. Homeownership appears to lead to poorer neighborhood conditions for all lower‐income buyers—not just minorities—and may be exacerbating social and spatial isolation rather than helping to overcome it. Differences in neighborhood outcomes, however, may be due to locational preference rather than discrimination in housing and mortgage markets.

Geographies of mortgage market segmentation: the case of essex county, new jersey

Since the late 1980s, mutually reinforcing trends in economic growth, public policy, and community activism have fostered a wave of residential mortgage lending to ‘underserved markets’ in US cities. Yet many of the changes in housing finance that supported sustainable home ownership also lured a new generation of subprime and predatory credit institutions specialising in high-cost, high-risk lending. For many urban and minority neighbourhoods, the old problems of exclusionary redlining are now accompanied by new dilemmas of exploitive greenlining. This paper analyses the market penetration of subprime lending institutions and the subsequent concentration of mortgage ‘pre-foreclosures’ in low- and moderate-income, African American neighbourhoods. Focusing on Newark, NJ, and its surrounding suburbs, Gary King's ecological inference technique and a series of logistic regression models are used to assess the role of borrower characteristics, institutional divisions, and neighbourhood context in the process of mortgage market segmentation. The evidence corroborates theories emphasising the dynamics of capital investment, financial services restructuring, and the economic incentives for racial-geographic targeting, and not the presumed credit deficiencies of urban and minority home owners. Unfortunately, the tidy empirical analysis offered here is overshadowed by the enormous societal experiment now underway across the US, as a wave of delinquencies, defaults and foreclosures undermines the belated minority home ownership gains achieved during the unprecedented boom of the 1990s.