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Published: Dec 18, 2008 12:30 AM
Modified: Dec 18, 2008 01:13 PM
Roberto Quercia calls low-income loans good business.
Sheila Bair of FDIC defends Community Reinvest-ment Act.

Home loans to the poor good policy, UNC says

Home ownership has social benefits in addition to economic ones, according to a study by researchers at UNC-Chapel Hill.

Low-income and minority homeowners are, for example, roughly twice as likely as renters to vote in local elections. They're also significantly more likely to vote in national elections and are more likely to be involved in their children's schools, according to the university's Center for Community Capital.

All this rubs off on homeowners' offspring.

"Their children are more likely to be involved in organized activities" such as dance, karate lessons or Boy Scouts and Girl Scouts, said Michal Grinstein-Weiss, a research fellow at the center and an assistant professor in UNC School of Social Work.

The bottom line: Encouraging home-ownership is sound public policy.

The ongoing study compares 4,000 low-income and minority homeowners across the country with a comparable group of renters. The homeowners obtained loans from lenders working with the Center for Community Self-Help, a nonprofit in Durham led by Martin Eakes. Self-Help's program -- which involves a partnership with mortgage lender Fannie Mae and is funded by a $50 million grant from the Ford Foundation -- also helps lenders meet their obligations to low-income borrowers under the Community Reinvestment Act.

Self-Help borrowers have a much better track record for staying current on their payments than those who got subprime loans.

Borrowers who obtained subprime mortgages in 2004 were nearly four times more likely to be delinquent on their loans 24 months later than a similar borrower who participated in Self-Help's program, the study shows.

"If done right, lending to low-income and minority families ... is good business," said Quercia, the center's director.

The research was presented Wednesday at a briefing in Washington that included Sheila Bair, chairman of the Federal Deposit Insurance Corp.

Bair said critics who contend the Community Reinvestment Act is at the root of the housing crisis are off-base.

Nothing in the CRA, said Bair, requires lenders to provide mortgages to people who can't afford to make their payments.

She argued that a key to ending the housing crisis is lowering monthly payments.

She said that, despite the current problems, homeowners are a good credit risk. The delinquency rate among all homeowners is 3.6 percent.