Why the US mortgage market is broken


For decades, Americans have relied on mortgages to buy homes. But experts say several aspects of today’s mortgage market, including cost, a lack of small dollar loans and lender bias, have all greatly inhibited Americans from owning their own property. Can the United States do anything to fix the broken system and allow mortgages to improve home ownership in America? Watch the video to find out. High house prices are not the only reason for the decline in home ownership in the United States. Banks and financial institutions do not issue enough small mortgages to help low-income families buy property. “It’s especially difficult for people buying small homes with smaller mortgages to find a lender and get that mortgage,” said Mike Calhoun, president of the Center for Responsible Lending. “And they’re also surprisingly more expensive.” More than a quarter of home sales nationwide are for homes priced under $100,000. Yet only 23.2% are purchased with a mortgage, compared to 73.5% of homes priced at or above $100,000, according to the Urban Institute. And the problem got worse. The value of mortgages between $10,000 and $70,000 and between $70,000 and $150,000 fell more than 53% and more than 21%, respectively, from 2011 to 2021, according to research by Atom Data Solutions. Meanwhile, the value of loans exceeding $150,000 has increased by 240% and more over the same period. Another study found that refusal rates for small dollar loans were significantly higher than refusal rates for larger loans. And it’s not because these loans are riskier. Additional research found that applicants for small loans had similar credit profiles to applicants for larger loans. The real reason is profit. “One of the barriers to small mortgages is that it’s just not as profitable for lenders to do them,” said Janneke Ratcliffe, vice president of the Urban Institute’s Housing Finance Policy Center. “Lenders get all of their fees and interest based on the amount of the loan, so they’ll get much less revenue on a $70,000 mortgage than on a $700,000 mortgage.”

Wed 25 May 2022 16:00:36 GMT


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