Small-Dollar Lending: Is There A Responsible Path Forward?

This report examines the problem of access to credit for low- and moderate- income households. It notes that this problem has two dimensions. On the one hand, there are millions of consumers without access to mainstream sources of consumer credit. On the other hand, many of these same consumers do obtain high-cost credit that ends up harming rather than helping them

Changing Patterns XI: Mortgage Lending to Traditionally Underserved Borrowers and Neighborhoods in Greater Boston, 1990-2003

The present study is the latest in a series of annual updates of the original report, Changing Patterns: Mortgage Lending in Boston, 1990-1993. Beginning in 1998, the reports’ geographic scope was expanded t o include an examination of mortgage lending patterns in 27 cities and towns surrounding the city of Boston. In last year’s report, the geographic coverage was further expanded to include a total of 108 communities. The text that follows this introduction highlights some of the most significant findings that emerge from the extensive set of tables and charts that constitute the bulk of the report. The first of the two major parts of the textual portion of the report, together with Tables 1–11 and their associated charts, provides an analysis of lending in the city of Boston from 1990 through 2003. This analysis is subdivided into three sections which focus, in turn, on total lending within the city, on lending by major types of lenders, and on lending under targeted mortgage programs. The second major part of the text, together with Tables 12–20, examines detailed information on mortgage lending patterns in 108 individual communities – all 101 cities and towns in the Metropolitan Area Planning Commission (MAPC) Region plus the seven largest Massachusetts cities outside that region – as well as in four progressively larger geographic areas: the MAPC Region as a whole, the “old” Boston Metropolitan Statistical Area (MSA), the “new” Boston MSA), and the entire state.2 Table 12 is preceded by a map of the MAPC Region

Changing Patterns X: Mortgage Lending to Traditionally Underserved Borrowers and Neighborhoods in Greater Boston, 1990-2002

The present study is the latest in a series of annual updates of the original report, Changing Patterns: Mortgage Lending in Boston, 1990-1993. Beginning in 1998, the reports’ geographic scope was expanded to include an examination of mortgage lending patterns in 27 cities and towns surrounding the city of Boston. In this year’s report, the geographic coverage has been further expanded t o include a total of 108 communities. This introduction is followed by ten pages of text that identify some of the most significant findings that emerge from the extensive set of tables and charts that constitute the bulk of the report. The first of the two major parts of the textual portion of the report, together with Tables 1–11 and their associated charts, provides an analysis of lending in the city of Boston from 1990 through 2002. This analysis is subdivided into three sections which focus, in turn, on total lending within the city, on lending by major types of lenders, and on lending under four targeted mortgage programs. The second major part of the text, together with Tables 12–20, examines detailed information on mortgage lending patterns in 108 individual communities – all 101 cities and towns in the Metropolitan Area Planning Commission (MAPC) Region plus the seven largest Massachusetts cities outside that region – as well as in four progressively larger geographic areas: the MAPC Region as a whole, the Boston Metropolitan Statistical Area (MSA) which has 127 cities and towns, the newly-defined Boston-Cambridge-Quincy New England Metropolitan City and Town Area (Boston NECTA) which has 155 cities and towns, and the entire state (351 cities and towns). Table 12 is preceded by maps of the MAPC Region, the Boston MSA, and the Boston NECTA

Borrowing Trouble? V: Subprime Mortgage Lending in Greater Boston, 2000-2003

Four years ago, in response to numerous reports of the growth of predatory lending, both locally and nationwide, the Massachusetts Community & Banking Council (MCBC) – whose Board of Directors has an equal number of bank and community representatives – commissioned a study of subprime refinance lending in the city of Boston and surrounding communities. The resulting report, Borrowing Trouble? Subprime Mortgage Lending in Greater Boston, 1999, was the first detailed look at subprime lending in the city of Boston and in twenty-seven surrounding communities. This is the fifth report in the annual series begun by that initial study. Geographic coverage has expanded to include data on subprime lending in 108 individual cities and towns. This is the first year that the report has examined subprime home purchase loans in addition to subprime loans made to refinance existing mortgages. Responsible subprime lending can provide a useful service. Subprime lenders can do this by making credit available to borrowers otherwise unable to obtain it, while charging somewhat higher interest rates and fees that bear a reasonable relationship to the increased expenses and risks borne by the lender. There is, however, considerable evidence that much or most subprime lending does not satisfy this definition of responsibility

Changing Patterns XIII: Mortgage Lending to Traditionally Underserved Borrowers and Neighborhoods in Greater Boston, 1990-2005

The present study is the latest in a series of annual updates of the original report, Changing Patterns: Mortgage Lending in Boston, 1990-1993. Beginning in 1998, the reports’ geographic scope was expanded to include an examination of mortgage lending patterns in 27 cities and towns surrounding the city of Boston. In 2003, the report’s geographic coverage was further expanded to include a total of 108 communities. This year’s report extends coverage to all counties, regional planning areas, and federally-defined metropolitan areas in Massachusetts. The text that follows this introduction highlights some of the most significant findings that emerge from the extensive set of tables and charts that constitute the bulk of the report. Part I, together with Tables 1–11 and their associated charts, provides an analysis of lending in the city of Boston from 1990 through 2005. This analysis is subdivided into three sections which focus, in turn, on total lending within the city, on lending by major types of lenders, and on lending under targeted mortgage programs. Part II, together with Tables 12–20, examines detailed information on mortgage lending patterns in 108 individual communities – all 101 cities and towns in the Metropolitan Area Planning Commission (MAPC) Region plus the seven largest Massachusetts cities outside that region. Part III, together with Tables 21-29, presents data on patterns of mortgage lending statewide and in the state’s major subdivisions: fourteen counties, nine metropolitan areas, and thirteen Regional Planning Agency areas. A map showing the MAPC Region and the Boston MSA precedes Table 12. Finally, Part IV briefly examines reasons for mortgage loan denials by race/ethnicity and income, statewide

Expanding Homeownership Opportunity: The SoftSecond Loan Program, 1991-2003

The SoftSecond Loan Program emerged at the end of a tumultuous year of struggle over community reinvestment issues that began on January 11, 1989. The lead story in that day’s Boston Globe reported that a draft study by researchers at the Federal Reserve Bank of Boston had found that there was a pattern of “racial bias” in Boston’s mortgage lending, that the number of mortgage loans in the predominantly black neighborhoods of Roxbury and Mattapan would have been more than twice as great “if race was not a factor,” and that “this racial bias is both statistically and economically significant.” In the aftermath of the Boston Globe’s story, the Massachusetts Affordable Housing Alliance (MAHA) joined with other community-based groups to form the Community Investment Coalition. While supporting the broad range of demands made by the coalition, MAHA’s particular focus was on the need for affordable mortgages. As the year progressed, banks announced a series of plans to open more branches and ATMs, finance the construction of affordable rental housing, and increase lending to minority-owned businesses. By year-end, affordable mortgage lending was the only issue on which community groups and banks had not crafted an agreement. MAHA’s members wouldn’t drop the issue and continued to insist on a mortgage program with below-market interest rates; the banks continued to insist that such a program would not be sustainable. Finally, a full year after the Globe’s story, Mayor Ray Flynn facilitated an end to the impasse – an agreement to make $30 million of below-market mortgage loans to low- and moderate-income Boston homebuyers. By the end of 2003, the SoftSecond Loan Program (SSLP) had enabled almost seven thousand lower-income households to purchase homes in 179 cities and towns throughout Massachusetts. Thirtyeight banks currently participate in the program. This report presents detailed information on the growth and current operation of the SSLP, with particular focus on the most recent three-year period

Changing Patterns XIV: Mortgage Lending to Traditionally Underseved Borrowers & Neighborhoods in Boston, Greater Boston and Massachusetts, 2006

This is the fourteenth in the annual series of Changing Patterns reports prepared for the Massachusetts Community & Banking Council (MCBC) by the present author. This year’s report, for the first time, includes the analysis of subprime lending that was previously presented in a separate annual series of Borrowing Trouble reports. The report presents information for the city of Boston, for Greater Boston, and for Massachusetts, as well as for each of the state’s fourteen counties and each of its thirty-three largest cities and towns. The analysis is based on federal Home Mortgage Disclosure Act (HMDA) data for 2006, as well as on data on population and income from the 2000 census and annual data on metropolitan area income levels from the Department of Housing and Urban Development. The report is restricted to first-lien loans for owneroccupied homes and gives particular attention to higher-cost loans, identified in HMDA data as having annual percentage rates (APRs) at least three percentage points higher than the current interest rate on long-term U.S. Treasury bonds; these loans are referred to in this report as high-APR loans, or HALs. Readers interested in additional detail will want to investigate the forty-eight pages of tables that follow the body of the report; these may be particularly useful for those interested in lending patterns in a particular community or region of the state

Changing Patterns XII: Mortgage Lending to Traditionally Underserved Borrowers and Neighborhoods in Greater Boston, 1990-2004

The present study is the latest in a series of annual updates of the original report, Changing Patterns: Mortgage Lending in Boston, 1990-1993. Beginning in 1998, the reports’ geographic scope was expanded to include an examination of mortgage lending patterns in 27 cities and towns surrounding the city of Boston. In 2003, the report’s geographic coverage was further expanded to include a total of 108 communities. The text that follows this introduction highlights some of the most significant findings that emerge from the extensive set of tables and charts that constitute the bulk of the report. Part I, together with Tables 1–11 and their associated charts, provides an analysis of lending in the city of Boston from 1990 through 2004. This analysis is subdivided into three sections which focus, in turn, on total lending within the city, on lending by major types of lenders, and on lending under targeted mortgage programs. Part II, together with Tables 12–20, examines detailed information on mortgage lending patterns in 108 individual communities – all 101 cities and towns in the Metropolitan Area Planning Commission (MAPC) Region plus the seven largest Massachusetts cities outside that region – as well as in four larger geographic areas: the MAPC Region as a whole, the Boston-Quincy Metropolitan Division (Boston MD), the Boston-Cambridge-Quincy Metropolitan Statistical Area (Boston MSA), and the entire state. Table 12 is preceded by a map showing the MAPC Region and the Boston MSA

Borrowing Trouble? IV: Subprime Mortgage Refinance Lending in Greater Boston, 2000-2002

The present report is the fourth in the annual series begun by that initial study; it extends the time period covered through 2002, and expands the number of individual cities and towns for which data on subprime refinance lending are provided to 108. Although motivated by a concern with predatory lending, this study and its predecessors – like all of the other quantitative studies of which I am aware – analyzes and reports on lending by subprime lenders. It is therefore important to emphasize that although all predatory loans are subprime, only a fraction of subprime loans are predatory. While predatory loans are by their nature abusive and harmful to borrowers, responsible subprime lending can provide a useful service. Subprime lenders can do this by making credit available to borrowers who might not otherwise be able to obtain it, at a somewhat higher cost that bears a reasonable relationship to the increased expenses and risks borne by the lender. Nevertheless, the existence of high levels of subprime lending in certain types of neighborhoods or among certain groups of borrowers indicates that these neighborhoods or borrowers are more likely to be targeted by predatory lenders and more vulnerable to being exploited by them. While acknowledging this very important distinction, the present study attempts to shed light on the problem of predatory lending – an unknown portion of total subprime lending – by examining data on lending by subprime lenders. The reason is very simple: systematic data on predatory lending are not available, but data on lending by subprime lenders are

Expanding Homeownership Opportunity II: The SoftSecond Loan Program, 1991-2006

This report provides data on lending by the SoftSecond Loan Program during the most recent three-year period (2004-2006) as well as over the sixteen-year life of the program. The Mortgage Lending Committee of the Massachusetts Community & Banking Council (MCBC) has had a special interest in the SoftSecond program since its inception and has carefully monitored the performance of its loans. The report updates an earlier report prepared for MCBC by the present author in 2004: Expanding Homeownership Opportunity: The SoftSecond Loan Program, 1991-2003. Detailed information about the origins and evolution of the program, and about the details of its structure and operation, are available in that report and elsewhere and are therefore not repeated here. The SoftSecond Loan Program gets its name from the fact that participating homebuyers receive two mortgages rather than one: a first mortgage for 77% of the purchase price and a second mortgage for 20%; the program requires at least a 3% down payment, at least half of which must come from the borrower’s own funds. Both mortgages are 30-year fixed-rate loans. In the great majority of cases (including all loans in Boston and all loans by the biggest banks), the interest rate on both mortgages is one-half of a percentage point below the bank’s two-point rate, although no points are charged. The second mortgage is “soft” (for the first ten years) in two ways – payments are interest-only (there is no repayment of principal during this period) and payments may be further reduced, for qualifying low- and moderate-income homebuyers, by public subsidies. The state also funds loan loss reserves for each bank equal to three percent of the total value of the second mortgages that the bank has originated. The existence of the reserve fund makes it possible for borrowers to avoid the costs of private mortgage insurance while banks are still protected from credit losses. Affordability is further increased, in Boston and some other communities, by the provision of down payment and other financial assistance from local governments