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Publication Date

September 2010


Anthony Pennington-Cross, Chao Yue Tian, Roberto G. Quercia


Ford Foundation

To assess the sustainability of affordable housing credit, a unique sample of community reinvestment loans is analyzed.

Conditional probability (hazard) of default tends to be higher and prepayment lower for lower-income groups. However, after controlling for observed mortgage and borrower characteristics, the hazards converge and even reverse in order of magnitude.

Furthermore, very low-, low-, and moderate-income groups react with distinct patterns to changes in the loan-to-value ratio and the local unemployment rate.

Finally, more financially stretched borrowers (those with high debt-to income ratios) seem to initiate the default option more aggressively as home equity declines.

Topics(s): Default, Bankruptcy, & Foreclosure, Housing Policy, Mortgage Finance