Michael A. Stegman

The Effects of Homeownership: on the Self-Esteem, Perceived Control and Life Satisfaction of Low-Income People

Abstract A variety of claims have been made concerning the social benefits of homeownership. This paper describes research designed to assess the impacts of homeownership on the self-esteem, perceived control and life satisfaction of low-income persons. The longitudinal study assessed changes in these three constructs, pre- and post ownership, and compared them to those in a control group of continuing renters. The findings indicate that, relative to the control group, those in the homeowner group did not experience a significant increase in self-esteem or sense of control. They did, however, experience a significant increase in life satisfaction. Moreover, housing condition, regardless of tenure, was found to influence both self-esteem and life satisfaction. The policy implications of the results are discussed.

The Impact of Home Ownership on the Social and Political Involvement of Low-Income People

Supporters of subsidized home-ownership programs have made claims concerning the benefits of home ownership. Home owners are said to be more involved in social and political affairs, including neighboring and participation in community organizations. The authors test these claims using longitudinal data collected on groups of low-income home buyers and low-income renters in Baltimore. The results indicate that home buyers are less likely to neighbor and are more likely to participate in neighborhood and block associations but not other community organizations. Home buyers who perceived more neighborhood problems or who emphasized economic reasons for buying were no more likely to participate in social and political affairs.

Payday Lending: A Business Model that Encourages Chronic Borrowing:

The tremendous growth in the demand for very small, short-term loans by credit constrained households is being largely filled by companies offering payday loans. This article explores the explosive growth of payday lending as a source of short-term consumer credit in low- and moderate-income communities, with a special emphasis on the relationship between industry business practices and the high incidence of perpetual indebtedness in which an increasing number of payday borrowers find themselves. Empirical analysis confirms two related truths about payday lending. First, there is no denying the large and growing demand for this consumer credit and the rapidly expanding network of companies willing to supply it. Second, despite its expanding customer base and notwithstanding industry denials, the financial performance of the payday loan industry, at least in North Carolina, is significantly enhanced by the successful conversion of more and more occasional users into chronic borrowers.

The impact of predatory loan terms on subprime foreclosures: The special case of prepayment penalties and balloon payments

Abstract There are growing concerns about the way predatory mortgages erode housing equity. We examine another potential impact: the relationship between abusive loan terms and foreclosure. Do predatory characteristics increase the likelihood of foreclosure once other risk factors are taken into account? We use a national database of subprime refinance first‐lien loans originated in 1999 to analyze this question. Even after we control for other factors, refinance loans with prepayment penalties are 20 percent more likely and those with balloon payments are 50 percent more likely to experience a foreclosure than other loans. These findings suggest that predatory loans have the potential not only to erode household wealth, but also to heighten negative effects on individuals, households, and communities. Excluding losses to borrowers, we estimate that prepayment penalties and balloon payment requirements in 1999 refinance originations increased national foreclosure‐related losses to lenders and investors by about

Accessibility models and residential location

465 and

The excessive costs of creative finance: Growing inefficiencies in the production of low‐income housing

127 million, respectively.

Assessing the Impact of North Carolina's Predatory Lending Law

Abstract Many residential location models have been developed within the context of long-range transportation planning programs and tend to explain housing consumer behavior largely in terms of minimizing the journey to work. This article questions the preeminence of accessibility in the residential location process and offers empirical evidence that neighborhood considerations are more important to residential locators than accessibility to place of work. It concludes with some recommendations for future modeling activity.

Preventive servicing is good for business and affordable homeownership policy

Abstract The paper examines creative finance as a means of low‐income housing production and preservation. The low‐income tax credit has evolved as the main federal housing production program in recent years. But this evolution can only be understood as a last resort. The inefficiencies of this approach outweigh any advantages. High transaction costs, inappropriate targeting of benefits, and insufficient monitoring are among the problems. Recent changes in the tax credit may actually cost the government more. Furthermore, current policy in fact creates the same time bombs now exploding in the prepayment projects. Current proposals for housing reform and revitalization have positive features, but are either underfunded or still rely on creative finance. What is needed is a direct one‐ or two‐step low‐income production program.

Public Housing Home-ownership Will It Work and for Whom?

Abstract This article examines changes in subprime mortgage originations before and after the implementation of North Carolinas Predatory Lending Law. Previous studies have noted a decline in overall subprime lending. This was to be expected, since the law was intended to reduce the number of predatory or abusive subprime loans. But which components of subprime lending declined, which remained stable or increased, and what happened to those loans that the law defines as predatory? Using a database of 3.3 million loans from 1998 to 2002, we find that the reduction that occurred after the law took effect was entirely due to a decline in refinancing loans and that almost 90 percent of this decline can be traced to a reduction in predatory loans. The law is doing what it was intended to do: eliminate abusive loans without restricting the supply of subprime mortgage capital for borrowers with blemished credit records.

Recent US Urban Change and Policy Initiatives

Abstract This article documents the growing importance of preventive servicing—business practices that emphasize early intervention in delinquency and default management practices that also help financially troubled borrowers avoid foreclosure. We suggest that the loan servicing side of the affordable housing delivery system may be underappreciated and undercapitalized. We use a database of more than 28,000 affordable housing loans to test several preventive servicing‐related propositions and find that after we control for loan and borrower characteristics, the likelihood that a delinquent mortgagor within this universe will ultimately default varies significantly across servicers. This suggests that loan servicing is an important factor in determining whether low‐ and moderate‐income borrowers who fall behind in their mortgage payments will end up losing their homes through foreclosure. It also suggests a need for policy makers to incorporate preventive servicing into affordable homeownership programs.