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Publication Date

October 2013


Adam J. Levitin, Janneke Ratcliffe


Ford Foundation, Bank of America, NeighborWorks America

If the housing crisis has had a silver lining, it is the opportunity to rethink our housing finance policy. The U.S. housing finance system and its regulation evolved to address particular crises and problems – the Great Depression, the post-War housing crunch, the 1960s budget crises, redlining, the savings and loan crisis – rather than as a planned, comprehensive system. As the mortgage finance market is restructured in the wake of the recent financial crisis, it is essential to ensure that it better serves the housing needs of all Americans.

Thus, an important question going forward concerns the role of duties to serve (DTS) – obligations on lending institutions to reach out to traditionally underserved communities and borrowers. Should there be DTS, and if so, who should have the responsibility to serve whom, with what, and how?

This paper first discusses the importance of homeownership and housing finance for economic opportunity. It then reviews the regulatory framework and history underlying the present set of DTS, addressing the policy concerns underlying these DTS and how they have changed. The paper identifies several problems in the existing DTS framework that will continue to limit the impact of DTS unless remedied. A discussion of the public purposes of financial services follows.

The paper concludes with recommendations for operationalizing DTS conceived of as public accommodations within the bounds of prudential regulation, laying out a quartet of reforms that will make DTS more effective. In particular, it proposes the creation of an independent DTS commission that would serve as an advocate for DTS and a check on financial institutions’ compliance outside the prudential bank regulators.

Topics(s): Affordable Homeownership, Community Advantage Program, Default, Bankruptcy, & Foreclosure, Impacts of Homeownership, Mortgage Finance, Other