One Way to Help Vulnerable Borrowers Sustain Homeownership

It's been shown that the wealth-building effects of homeownership, particularly for historically disadvantaged populations, depend heavily on how long homeownership is sustained, so it makes sense that continuing to improve the foreclosure prevention process would be key in helping close the racial homeownership gap.

According to a report published by the Urban Institute and funded by the Federal Home Loan Bank of San Francisco, one promising solution that could help less affluent borrowers preserve homeownership is to establish mortgage reserve accounts (MRAs) that they can tap into to help weather a financial shock, HousingWire reports.

There are a lot of questions that arise from the use of such tools including those surrounding implementation, achieving scale and making mortgage outcomes more equitable, the report says. With MRAs, however, variations on the concept “are under early-stage development by retail mortgage lenders and the secondary market actors Fannie Mae and Freddie Mac,” the report explained.

“Whatever the approach, if the foreclosure rate for Black mortgage borrowers decreased to the average foreclosure rate among white mortgage borrowers, an estimated 300,000 more Black homeowners would keep their homes and have the opportunity to build generational wealth,” the report explained. “Additionally, making mortgages less risky for lenders, insurers, and investors, in addition to families, should lead to an expansion of the credit box and allow even more households with modest incomes and resources to access and realize the benefits of homeownership.”

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