March 9, 2004
Joint Center for Housing Studies, Harvard University
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." Clearly, these shifts pose new challenges to community based organizations as they seek to promote home homeownership opportunities and revitalize communities. 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. In most instances the new mortgage delivery system has expanded access to prime mortgages on favorable terms, yet all too often lower-income and minority communities are served by a distinctly different set of organizations offering a distinctively different mix of products. Unfortunately, most community groups have not fully digested the enormity of the changes that have occurred in the mortgage banking industry and have failed to make the necessary adjustments. Many CBOs understand the significance of the changing market environment, but lack the resources and organizational capacity to respond effectively. Recognizing the fact that many CBOs continue to do business as they have for decades, this report examines both the factors that limit the ability of CBOs to adapt and the possible solutions to evolve in the transforming mortgage banking industry.
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