The Changing Industrial Organization of Housing Finance and the Changing Role of Community-Based Organizations

BABC 04-9: This paper examines forces that are reshaping the mortgage banking industry and the ongoing efforts of community-based organizations (CBOs) to expand access to mortgage capital for lower-income people and communities.1 Today’s mortgage market bears little resemblance to the one that existed just a few decades ago. Key changes include increasing use of automated underwriting, credit scoring, and risk based pricing, as well as the rise of a mortgage delivery system dominated by mortgage brokers, secondary market activities and national mortgage banking and mortgage servicing operations. While these changes have prompted a surge in lending in lower-income and minority neighborhoods, this growth is linked to the emergence of a dual mortgage delivery system characterized by a noticeable absence of conventional prime mortgages in these same areas. Instead low-income and minority borrowers and communities are today disproportionately served by government-backed, subprime, or manufactured home lending, and exposed to new threats linked to rising rates of mortgage delinquency and default and a noticeable uptick in abusive lending practices…