issue: Housing

Weinstein for The Hill, “The right way to create greater competition in consumer credit scoring”

Posted on by The Progressive Policy Institute

Why is the decision to promote competition in the credit scoring model industry complicated? At first blush it would seem to make perfect sense. More competition could lead to lower costs for those who use the scores. Furthermore, it might increase the likelihood that some qualified individuals — who may not be approved for a loan under the criteria utilized by the FICO model — get access to credit.

The problem is not of course more competition. The credit scoring industry — and ultimately consumers — would benefit from more alternatives to FICO. This was discussed at an event I moderated this week in Washington, D.C. hosted by the Progressive Policy Institute.

The issue is the legislation to push for alternative scoring models may simply trade one dominant player (FICO) for another (Vantage).

The reason? Because the owners of Vantage control the supply of information currently used by FICO to make its determination. And given the history of monopolies, it would not be surprising to see Equifax, Experian, and TransUnion use that leverage to the advantage of Vantage, and eventually force FICO out of business.

Continue reading at The Hill.

Updated Credit Scoring and the Mortgage Market

Posted on by The Progressive Policy Institute

Our past event featured newly issued white papers from respected industry experts related to the ongoing GSE credit score evaluation. Topics include: Research from a leading analytics firm on the value that updated credit scoring models will add to the mortgage market; Economic and competitive issues in the credit scoring market as detailed by an industry economist; and Legal and regulatory matters to consider as outlined by a former state banking commissioner.

 

Read the reports:

“Risks and Opportunities in Expanndinng Mortgage Credit Availability Through New Credit Scores” by Tom Parrent

“Alternate Credit Scores and the Mortgage Market: Opportunities and Limitations” by Ann B. Schnare

Building a New Middle Class in the Knowledge Economy

Posted on by The Progressive Policy Institute

The election of Donald Trump to the presidency in 2016 has made policymakers and politicians in the U.S. much more aware of an important demographic group – the white working class – than before.

We have ignored their plight and their concerns for far too long, and have grown much too complacent about the extent to which they have fallen behind more-educated groups and shared insufficiently in the economic growth we’ve experienced in the past few decades.

Of course, even before the election, labor market analysts and demographers had been discovering that the economic and social outcomes we observe among a large group of less-educated Americans – particularly men with high school or less education – were stagnating or deteriorating.



			


	

			




			
				


	

		
Fighting Poverty with HOPE

				

			Posted on  by The Progressive Policy Institute		

			


	

		
Economists often apply the term “opportunity costs” to high and middle-income people, meaning that the time they spend on one task is time not available to perform other, potentially more valuable tasks. But social scientists rarely apply the concept to low-income people, acting as if their time is essentially worthless. Sort of like the spouse who doesn’t count your food shopping, cooking, cleaning, child-rearing, accounting for family finances, shuttling family member to appointments, taking care of your sick parents, etc., as work.


Yet, in addition to lacking money, low-income Americans frequently lack time. Just as many personal relationships collapse when people don’t have “quality time” with each other, a lack of time works mightily against the efforts of lowincome people to have constructive relationships with their families and with the broader society.


 




 


			


	

			




			
				


	

		
Unleashing Innovation and Growth: A Progressive Alternative to Populism

				

			Posted on  by The Progressive Policy Institute		

			


	

		
As Americans choose a new president in 2016, populist anger dominates the campaign. To hear Donald Trump or Senator Bernie Sanders tell it, America is either a global doormat or a sham democracy controlled by the “one percent.” These dark narratives are caricatures, but they do stem from a real dilemma: America is stuck in a slow- growth trap that holds down wages and living standards. How to break this long spell of economic stagnation is the central question in this election.


Today’s populists peddle nostalgia for our country’s past industrial glory but offer few practical ideas for building a new American prosperity in today’s global knowledge economy. Progressives owe U.S. voters a hopeful alternative to populist outrage and the false panaceas of nativism, protectionism, and democratic socialism. What America needs is a forward-looking plan to unleash innovation, stimulate productive investment, groom the world’s most talented workers, and put our economy back on a high-growth path. It’s time to banish fear and pessimism and trust instead in the liberal and individualist values and enterprising culture that have always made America great.




Download Unleashing Innovation and Growth: A Progressive Alternative to Populism


			


	

			




			
				


	

		
Washington Post: The new Democratic Party proposal to rival Bernie Sanders’ socialism

				

			Posted on  by The Progressive Policy Institute		

			


	

		
Simplicity is one of Bernie Sanders’ great strengths: Corporations and the rich have rigged the economy. His solutions sound simple, even when the plans behind them are complicated: college for all, health care for all, tax the rich, break up big banks. He trails Hillary Clinton in presidential delegates to this point, and he remains an underdog for the Democratic nomination, but Sanders has already pulled Clinton, and the party, toward a more populist, more socialist policy agenda, thanks in part to that clarity of message.


The centrist Democrats who oppose that leftward lurch have struggled to match his simplicity. They tend to view the economy through a lens of skills and adaptation, not power and treachery. Many of them pushed in the 1990s, under President Bill Clinton, to expand global trade and deregulate the financial sector. They now concede those efforts did not go according to script, particularly for middle-class workers, but they are not calling for a full rewrite in response.


Their risk, in this election and moving forward, is to define themselves solely as anti-Democratic-socialist – the folks who don’t like the stuff that a lot of Democrats like about Sanders.


The Progressive Policy Institute is the latest centrist Democratic institution to try to counter that image. Today it will release what its president, Will Marshall, calls a “radical” agenda to get America working for the working class again. The report is called “Unleashing Innovation and Growth: a Progressive Alternative to Populism,” and it is organized around a straightforward, if not perfectly simple, principle.


Read more at The Washington Post


			


	

			




			
				


	

		
GSE Reform: Not So Fast

				

			Posted on  by The Progressive Policy Institute		

			


	

		
Like so many issues in Washington these days, the debate over what to do with the nation’s housing Government Sponsored Enterprises (GSE)—Fannie Mae and Freddie Mac—has been caught up in the Jihad against the role of government in any form.


That’s a shame because last spring, with the announcement from Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking member Mike Crapo (R-Idaho) of a bipartisan bill to reform the nation’s housing finance system, it appeared that the question of what to do with Fannie Mae and Freddie Mac had finally been answered.


Instead, the Johnson-Crapo bill became another victim of ultra-right ideology, as strident opposition to anything short of the elimination of any government role in the mortgage backed securities marketplace remains unacceptable to House Republicans. Their approach—which was incorporated in the PATH Act (which passed the House last year), proposed virtually eliminating the Federal guarantee of mortgages in five years.


That’s not to say the Johnson-Crapo bill was perfect by any means. Compromise isn’t about creating the best solution, but rather a better solution than the status quo.


Conitue reading the brief here.


			


	

			




			
				


	

		
USA Today: Sizzling tech economy is fueling urban renaissance

				

			Posted on  by The Progressive Policy Institute		

			


	

		
In USA Today, Sam Zuckerman discusses the explosion of tech jobs and their impact on urban areas. While Zukerman notes the ability of tech jobs to bring economic growth to cities, he also highlights the negatives that come with the tech economy, primarily the increasingly high cost of housing that forces long-term resdients to move out. Zuckerman cites PPI Chief Economic Strategist Michael Mandel on an index he constructed to determine the importance of tech to a city’s economy. Zuckerman also quotes Mandel on the impact of the tech economy:


Areas with a faster growing tech sector tend to have faster growing non-tech employment as well,” Mandel said. Nationwide, private-sector non-tech wage and salary employment rose 5.4% from 2009 to 2013. But in the 10 large U.S. counties where growth of tech jobs had the biggest economic impact, non-tech jobs rose 10%, almost twice that rate, according to Mandel’s preliminary analysis.


“As techie ranks swell and the overall economy expands at a faster pace, demand for shelter heats up. That leaves more and more people priced out of the housing market.”


The full article can be found on USA Today’s website.


			


	

			




			
				


	

		
Homeownership for millennials to rise faster in N.C. than other states

				

			Posted on  by The Progressive Policy Institute		

			


	

		
Writing for Triangle Business Journal, Sarah Chaney quotes PPI Economist Diana Carew on North Carolina’s higher rate of homeownership among Millennials.  As the article describes, North Carolina has created an attractive economic climate, drawing in more first-time home owners than other states. According to Carew, this is a trend that will continue in North Carolina and the state should expect homeownership rates for Millennials to continue to rise.


Broadly speaking, some states are doing a better job than others at attracting young workers – and North Carolina happens to be one of them, says Diana Carew, an economist at the Progressive Policy Institute.


“That’s because they’ve got great apprenticeship programs, the Research Triangle, good regulatory policies,” she says.


Read the full article on Triangle Buisness Journal’s website.


			


	

			




			
				


	

		
Bloomberg: Millennials Seen Surging as Homeowners in U.S.: Mortgages

				

			Posted on  by The Progressive Policy Institute		

			


	

		
In Bloomberg, “Millenials Seen Surging as Homeowners in U.S.: Mortgages,” Alexis Leondis and Shobana Chandra’s look at the difficulties facing young Americans aspiring to be homeowners in today’s economy. Economist Diana Carew at PPI is quoted on the future prospects of millennial homeownership throughout the United States.




Cities in Texas and North Carolina, where the cost of living is cheaper and jobs are more plentiful, may see homeownership rates for millennials rise faster, said Diana Carew, an economist at the Progressive Policy Institute.”






Read the full article on Bloomberg.




			


	

			




			
				


	

		
USA Today: Mortgage reform roils Washington

				

			Posted on  by The Progressive Policy Institute		

			


	

		
USA Today‘s Darrell Delamaide quoted PPI’s Jason Gold on GSE reform.


He recalled the debate over the future of the two government-controlled entities that back most mortgages today — Fannie Mae and Freddie Mac — caused by the new bipartisan Senate bill that would wind down and replace Fannie and Freddie with a complex mix of private lending and government guarantees. He reminded with PPI that reform should prevail over liquidation regarding Fannie and Freddie.


Shuttering the GSEs completely … makes little sense. The idea that you can completely dismantle a housing finance infrastructure that is the foundation of an $11 trillion market is a fantasy the likes of which is only found in Washington.


Read the entire USA Today article here.


			


	

			




			
				


	

		
Sens. Johnson, Crapo On The Right Track to Housing Reform

				

			Posted on  by The Progressive Policy Institute		

			


	

		
The housing sector is one of the pillars of the U.S. economy. That’s why we have marveled at the many partisan and radical proposals to reform the federal housing finance system that would have trashed both what’s good and what’s bad with the current system. PPI continues to maintain that any reform proposal must stabilize U.S. housing markets, reduce the government’s over-sized footprint in housing finance and protect taxpayers from a repeat of the housing bailout.


While the full details aren’t yet available, a bipartisan proposal from Senators Tim Johnson (D-South Dakota) and John Crapo (R-Idaho) seems to move the housing debate out of the ideological realm and closer to reality. Their blueprint ensures the continued availability to homebuyers of long-term, fixed-rate mortgages, and proposes creation of a fee-based insurance fund, similar to the Federal Deposit Insurance, to shield taxpayers from having to bailout the housing finance sector in the future.


There are still many details in question, but we think Senators Johnson and Crapo have pointed the housing debate in a more promising direction.


			


	

			




			
				


	

		
NYT: Race Gap on Conventional Loans

				

			Posted on  by The Progressive Policy Institute		

			


	

		
In the New York Times Lisa Prevost   referenced PPI Senior Fellow Jason R. Gold’s proposal to mitigate the inequitable access to loans in the conventional market between minority applicants and nonminority applicants.


The statistics show that Black and Hispanic applicants are far more likely to be turned down and that they are opting for F.H.A. loans that can prove expensive because of the high mortgage insurance premiums. This situation leads to a problematic dual housing market based on racial and ethnic groups. Before the need of a broadening of the lower-down-payment availability, Gold suggested the creation of HomeK accounts. This system would enable workers to single out up to 50 percent of their contributions from a retirement account into this HomeK account:


The HomeK accounts would give workers the option of using up to half of their contributions to 401(k) retirement savings for a down payment on their first home.


Read the entire New York Times article here.


			


	

			




			
				


	

		
How the Housing Recovery Will Become Sustainable

				

			Posted on  by The Progressive Policy Institute		

			


	

		
After the country (and the world) witnessed the debacle of the government shutdown, most Americans are now convinced there isn’t a thing policymakers in Washington truly agree on. Only the threat of a global economic calamity in the form of a debt ceiling breach forced Congress to agree on reopening the federal government.


But while most issues facing the country have become decidedly red or blue, when it comes to getting private investors back into the mortgage market, and decreasing the reliance on government by resolving the fate of Fannie Mae and Freddie Mac (known as Government Sponsored Enterprises or GSEs), Washington, D.C. is downright purple.


Since the mortgage meltdown in 2008, however, private capital has been a very small part of the mortgage making process. The government currently backs more than 90 percent of all mortgages made. The slow trickle of private investors who have been coming back into the market is increasing, but they have so far only shown interest in the safest, most pristine borrowers.


But as investors increasingly develop an appetite for private mortgages, which is a good thing, the size of the pools of private loans (known as securitizations) seems to be shrinking.


Continue reading at U.S. News & World Report.


			


	

			




			
				


	

		
A Housing Reform Test Drive

				

			Posted on  by The Progressive Policy Institute		

			


	

		
U.S. housing officials are preparing to reduce the government’s abnormally large footprint in mortgage markets, one of the most visible remaining legacies of the subprime lending crisis. It’s the right move at the right time.


The Wall Street Journal reported Monday that the Federal Housing Finance Authority will order Fannie Mae and Freddie Mac to cut the size of mortgage loans they will guarantee. The idea is that with the government backing nine out every 10 loans, taxpayers are bearing too much risk, and it’s time for private capital to step in and take on a greater share.


That’s the right call, but it will meet resistance from the housing industry and consumer advocates who worry, quite reasonably, that it might mean even tighter credit for middle-income homebuyers in certain high-priced markets (typically found along the coasts), such as San Francisco, New York and Washington, D.C. Such advocates of maintaining the status quo say the recovery is still too shaky and investors are still leery about buying and making loans to any but the most affluent, low-risk borrowers.


But private mortgage investors, on the other hand, are likely to applaud the FHFA’s move. Investors and securitization firms like Redwood Trust and Two Harbors have been eager for the opportunity to show what they can do when they don’t have to compete with the federal government. They say there is plenty of appetite for private lending, so long as they aren’t undercut by the ultra-low rates the government can offer. Continue reading “A Housing Reform Test Drive” →


			


	

			




			
				


	

		
More Evidence That Ending Fannie Mae and Freddie Mac Is a Mistake

				

			Posted on  by The Progressive Policy Institute		

			


	

		
Last week, I argued against Congressional proposals to “get government out of housing” by killing government backed mortgage firms Fannie Mae and Freddie Mac. Now comes fresh evidence that buttresses my view that the private sector just isn’t ready to take up the slack if the two mortgage giants are eliminated.


This week, Redwood Trust, one of the largest issuers of private residential mortgages, released details of its latest securitization package. The good news is that it was Redwood’s 11th deal of the year, which shows private investors are coming back into the mortgage market totally dominated by Fannie and Freddie over the past five years. The bad news: A close reading of the package shows that private investors are still looking for ultra-safe, plain vanilla loans to pool and sell as securities. And they’re harder to come by.


No one doubts that since Fannie and Freddie were taken into conservatorship in 2008, private capital in mortgage markets has been scarce. Having lost billions when the housing bubble burst, private investors were in no hurry to resume lending. That’s why Fannie and Freddie were forced to expand their lending, from roughly 40 percent of the market pre-crisis to 77 percent in 2012.


Everybody knows we won’t return to “normalcy” in housing until their footprint shrinks and that of private investors expands. But House Republicans, who imagine that housing markets can get along just fine without the government guarantees Fannie and Freddie offer, might want to take a good look at Redwood’s latest package. It offers insight into the current appetite of private investors for mortgage risk.


Continue reading at U.S. News and World Report.