Building Assets, Building Credit: Symposium Proceedings

The dream of equal, fair, and expanded access to credit in low-income communities was never more within the nation’s grasp. Three decades ago credit for home mortgages and other asset building opportunities was far less widely available than it is today. Until recently, if an applicant’s credit history was marred by past payment problems he or she was rejected for a loan and could not get one at any price. Now the amount of savings a mortgage applicant needs to qualify for a loan is reduced as a share of property value and transaction costs in mortgage finance declined. Many more borrowers with past payment problems or scant documentation of past payment histories are able to qualify for credit, albeit at higher prices and fees, due to new tools that predict loan performance from applicants’ past behavior and application characteristics. This move to risk-based pricing opened up opportunities to those who once could not access credit funded through the capital markets and by banks and thrifts…