skip navigation

Saturday, March 28, 2015

[ – ] Text Size [ + ]  |  Print Page

Discussion Papers

The following discussion papers examine issues of affordable housing, community and economic development, financial education, and consumer credit and payments that affect low- and moderate-income people and communities.

Home Mortgage Appraisals

The department has released a series of discussion papers on home mortgage appraisals. The first paper of the series, released in June 2014, focuses on the pattern of appraisal bias in the Third Federal Reserve District. The second paper, released in August 2014, focuses on the impact of the Home Valuation Code of Conduct on appraisal and mortgage outcomes nationally. Detailed descriptions and the full studies are available below:

  • The Impact of the Home Valuation Code of Conduct on Appraisal and Mortgage Outcomes PDF (587 KB, 34 pages) New

    During the housing crisis, it came to be recognized that inflated home mortgage appraisals were widespread during the subprime boom. The New York State Attorney General’s office investigated this issue with respect to one particular lender and Fannie Mae and Freddie Mac. The investigation resulted in an agreement between the Attorney General’s office, the government-sponsored enterprises (GSEs), and the Federal Housing Finance Agency (the GSEs’ federal regulator) in 2008, in which the GSEs agreed to adopt the Home Valuation Code of Conduct (HVCC). Using unique data sets that contain both approved and nonapproved mortgage applications, this study provides an empirical examination of the impact of the HVCC on appraisal and mortgage outcomes. The results suggest that the HVCC has reduced the probability of inflated valuations and induced a significant increase in low appraisals. The HVCC also made it more difficult to obtain mortgages in the aftermath of the financial crisis.
  • The Pattern of Appraisal Bias in the Third District During the Housing Crisis PDF (569 KB, 28 pages)

    Appraisers have often been criticized for the inflated home values that were more prevalent during the housing boom, as well as overly conservative valuations during the housing bust. However, little research has been done to help understand how appraisal valuations respond to rapidly changing local market conditions and regulatory environments. This study provides an empirical examination of the pattern of appraisal bias during the housing crisis in the Third Federal Reserve District. Based on a unique transaction-level appraisal data set, this study evaluates how the lack of market activity, the concentration of foreclosures, and the increased use of appraisal management companies, as well as other factors, impact the incidence of low appraisals during the crisis. This study further examines the possible challenges created by low appraisals on the access to mortgage credit.

Residential Migration, Entry, and Exit as Seen Through the Lens of Credit Bureau Data PDF (426 KB, 36 pages)

We analyze a large, nationally representative anonymized data set of consumers with a credit report from 2002 to 2010. This is a period that encompasses a boom and bust in consumer credit. Using census data, we classify consumers into four categories of relative neighborhood income and find that, over time, the number and proportion of consumers with a credit report fell in low- and moderate-income neighborhoods and rose in higher-income neighborhoods. Population trends evident from census data explain only a portion of these changes in the location of the credit bureau population. In most instances, the primary driver reflects residential migration from relatively poorer neighborhoods to ones with relatively higher incomes. Patterns of entry into or exit from the credit bureau population were correlated with the credit cycle, as well as with relative neighborhood income, resulting in slower sample growth in low- and moderate-income neighborhoods during periods of credit contraction. These results are interesting in themselves, but they are also important for interpreting empirical results estimated from credit bureau data.

FHA Lending: Recent Trends and Their Implications for the Future PDF (9.08 MB, 62 pages) 

This paper examines borrower characteristics over the course of the previous decade, a period in which the FHA experienced both a sharp decline in its market share and lending volume as the subprime segment expanded and a subsequent reversal of fortune as it emerged as one of the major supports of the housing market in the wake of the subprime collapse. The report provides information on trends in borrower cohorts along such dimensions as first-time homebuyer status, income, and FICO score; examines variations across regions in overall lending trends and borrower characteristics; considers what borrower patterns in post-subprime years may suggest about the nature of the FHA borrower pool going forward; and draws on the paper’s empirical findings to identify factors that policymakers might consider in evaluating how different proposals for the evolution of the housing finance sector might affect the nature of FHA lending.

Building Sustainable Ownership: Rethinking Public Policy Toward Lower-Income Homeownership PDF (568 KB, 35 pages)

Based on a review and assessment of the literature on the costs and benefits of homeownership, provides a framework for public policy toward lower-income homeownership through an analysis of how those costs and benefits are affected by the homebuyer's income. Makes the case that public policy and resources should be directed less toward maximizing the number of lower-income homeowners and more toward maximizing the quality and stability of the homeownership experience for lower-income owners; offers a series of specific policy recommendations to that end.

Subprime Lending Over Time: The Role of Race PDF (971 KB, 26 pages)

Analyzes the racial gap in subprime mortgages over time. The study estimates a portion of the gap that cannot be attributed to such characteristics as income, credit score, loan amount, degree of documentation, denial rate, residence in a minority tract, and debt-to-income ratio. It concludes that the unexplained portion suggests that bias in mortgage lending cannot be ruled out.

Economic and Social Impact of Introducing Casino Gambling: A Review and Assessment of the Literature PDF (661 KB, 34 pages)

Reviews and assesses the existing literature on the potential economic impact of introducing casino gambling into a community or region, first by discussing the casinos’ effect on economic activity and growth within a community or region, and then by exploring their effect on government revenues. Also discusses the literature related to the economic impact of social costs widely associated with gambling, such as increases in crime, bankruptcy, and problem gambling.

Affordability and Availability of Rental Housing in Pennsylvania

Can be found in the Special Reports section of the website.

Alternative Financial Service Providers and the Spatial Void Hypothesis PDF (3.8 MB, 33 pages)

Examines the use of alternative financial service providers (AFSPs) such as check-cashing outlets and pawnshops in Philadelphia, Montgomery, Delaware, and Allegheny counties. Also explores whether these providers are disproportionately serving minority and low-income areas.

Alternative Financial Service Providers and the Spatial Void Hypothesis: The Case of New Jersey and Delaware PDF (936 KB, 18 pages)

Continues the use of the spatial void hypothesis methodology to analyze the location of alternative financial service providers, such as check cashing outlets and pawn shops, in New Castle County, Delaware, and Atlantic, Mercer, Monmouth, and Passaic counties in New Jersey. Also explores whether these providers are disproportionately serving minority and low-income areas.

Alternative Financial Vehicles: Rotating Savings and Credit Associations (ROSCAs) PDF (749 KB, 31 pages)

Describes how ROSCAs work and discusses the benefits that accrue to ROSCA participants and some of the costs they incur. Of particular interest is the introduction of a partial data set collected from a local ROSCA, which offers a glimpse of the capital costs ROSCA participants face and which could ultimately be contrasted with the capital costs faced by borrowers at mainstream financial institutions.

Financial Resources for the Environment: The Unsuccessful Attempt to Create a Private Financing Intermediary for Brownfield Redevelopment Projects PDF (2.06 MB, 38 pages)

Analyzes an unsuccessful attempt to establish a financing intermediary for the development of environmentally contaminated property (commonly known as brownfields) in Pennsylvania. The proposed intermediary was called Financial Resources for the Environment.

Home Ownership Education and Counseling: Issues in Research and Definition PDF
(109 KB, 31 pages)

Assesses existing research on the effectiveness of home-ownership education and counseling and opportunities for future research.

How to Spend $3.92 Billion: Stabilizing Neighborhoods by Addressing Foreclosed and Abandoned Properties PDF (326 KB, 27 pages)

Gives guidance on the best use of funds appropriated by the Housing and Economic Recovery Act of 2008 for the purpose of assisting states, counties, and cities in their efforts to stablize hard-hit neighborhoods. The discussion paper was written by Alan Mallach, visiting scholar at the Bank.

The Impact of Housing Rehabilitation on Local Neighborhoods: The Case of the St. Joseph's Carpenter Society PDF (2.92 MB, 25 pages)

Presents the results of a Philadelphia Fed study that analyzes whether the community development efforts of a nonprofit in Camden, NJ, have an effect on local neighborhoods.

Preserving Multifamily Rental Housing: Improving Financing Options in New Jersey PDF(645 KB, 44 pages)

Summarizes the obstacles to financing small multifamily rental properties in New Jersey and makes recommendations for policies to address this credit need.

Preserving Multifamily Rental Housing: Noteworthy Multifamily Assistance Programs PDF (289 KB, 34 pages)

Describes noteworthy multifamily-assistance programs around the country, including mortgage-insurance, secondary-market, technical-assistance, and tax-abatement programs. Produced by the Federal Reserve Banks of New York and Philadelphia.

E-Mail Notification

Find out when information for community development publications and events is released.

Contact Us

Federal Reserve Bank of Philadelphia
Community Development Studies and Education Department
Ten Independence Mall
Philadelphia, PA 19106-1574

(215) 574-6458 – phone
(215) 574-2512 – fax

View All Contacts