Regaining the Dream

Millions of Americans have lost their homes since the start of the Great Recession. By the middle of 2010, 4.6% of U.S. home mortgages were in foreclosure, three times the rate seen at the height of the Great Depression. Is the dream of homeownership for America's working families obsolete, an aspiration from a bygone era? In Regaining the Dream, a trio of researchers from the University of North Carolina's Center for Community Capital rejects that notion. Roberto G. Quercia, Allison Freeman, and Janneke Ratcliffe argue that there is a way to strengthen the financial system while simultaneously promoting an equitable, sustainable American home ownership policy.

The authors contend that affordable lending can continue without the excessive risk-taking that led to the current mortgage crisis. Their argument is based on exhaustive examination of a portfolio of mortgage loans made to lower-income borrowers over the past decade. Obviously, borrowers who have fewer resources pose higher risk than borrowers with greater resources, but are borrowers with low incomes too risky to lend to?

The authors reveal that the issue is not whether low-income, low-resource individuals pose a higher risk than those with midlevel or high incomes, it is that a mortgage product can either amplify or mitigate the negative impact of a given risk profile. Synthesizing rigorous, peer-reviewed analyses from the Center's multidisciplinary research team, Regaining the Dream demonstrates that correctly structured loans to low-income households perform quite well, leading to both sustainable homeownership and sound business opportunities.

Until now, there has been little in the way of real-time data to inform the debate about the future of American housing policy. The researchers at the Center for Community Capital fill this gap. They provide important evidence about the benefits and pitfalls of homeownership for a population traditionally underserved by the mainstream market. Their work shows that it is indeed possible to regain the dream of homeownership, while minimizing the risk that doing so will result in another economic nightmare.