Credit, Capital and Communities: The Implications of the Changing Mortgage Banking Industry for Community Based Organizations

Today’s mortgage market bears little resemblance to the one that existed just a decade ago. Key changes include the increasing use of automated underwriting, credit scoring, and risk based pricing, as well as the development of a mortgage delivery system dominated by mortgage brokers, secondary market activities and national mortgage banking and mortgage servicing operations. With new low downpayment products and a highly automated mortgage delivery system, the mortgage industry -- often operating through a network of mortgage brokers – has dramatically expanded lending in the same low-income, low-wealth and minority neighborhoods that were once victimized by mortgage “redlining.” Yet despite the expansion of lending to previously underserved communities, the changing structure of the mortgage industry poses a set of challenging public policy problems.