Changes in the mortgage industry challenge the activities of community-based organizations, and those groups must improve their lending activities because of the changes, according to a recent study by the Joint Center for Housing Studies of Harvard University.

The study found that new low down payment products and an automated mortgage delivery system have contributed to a dramatic expansion of lending in the same low-income, low-wealth neighborhoods once victimized by mortgage “redlining.” In many cases, however, the new delivery system also has created a dual market structure with expanded access to prime mortgages on favorable terms but with lower-income and minority communities served by a different mix of products.

“Despite the overall increase in access to mortgage capital, a racial gap persists in the ability of minorities to secure prime loans, even after controlling for income,” the study’s authors wrote.

That disparity and the associated rise in subprime lending undermine the effectiveness of community based loan programs, as well as their homeowner education and counseling efforts, the study found.

Given the changes, the study concluded that CBOs must improve their mortgage lending activities, expanding their use of technology to save money and to focus even more attention on hard-to-serve customers. CBOs also could produce a “home mortgage price guide” to educate borrowers about the range of rates they can expect.

The study concluded that the groups must also rethink their approach to advocacy, forming new partnerships to continue pressuring government and industry officials to address problems in today’s mortgage market.

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