Since the 1990s, federal housing policies expanded the opportunities available to low-income families, significantly increasing the numbers of Latino homeowners from 45% in 2000 to 50% in 2007. However, the ongoing economic and housing crises of the past few years have seen Latino homeownership rates fall below 47% by the end of 2010. For some Latino homebuyers, the American Dream has become una pesadilla (nightmare). According to the Center for Responsible Lending (2010), nearly one out of five Latino homeowners have already lost or are at imminent risk of losing their homes before the current foreclosure crisis abates. Of particular concern is the long-term sustainability of homeownership and how housing burden, subprime and predatory lending, and rising nonhousing indebtedness are associated with the increased risk of foreclosure and housing instability for low-income, Latino homebuyers. In this study, we assess how graduation from a pre-purchase homeownership counseling and asset building program (HOP) operated by the Denver Housing Authority (DHA) is associated with the sustainability of homeownership among low-income Latino homebuyers. Specifically, we examine the extent to which program participation was associated with (1) initial and current housing burden; (2) the terms and conditions of original mortgage loans; (3) the terms and conditions of subsequent refinancing; (4) the duration of homeownership; (5) the accumulation of nonhousing debt; and (6) foreclosures.
This mixed-methods study uses longitudinal data from the Denver Housing Study. Our sample consists of 275 former public housing residents who purchased homes during the period from 1995 through 2009; 115 of who participated in HOP. The remaining 160 homeowners were residents who purchased homes without assistance from DHA and serve as a control group. Data used in the study include quantitative and qualitative data gathered from interviews with homeowners, administrative and real estate transaction data from time of purchase through 2010 and longitudinal neighborhood indicators (including foreclosure data) for the City and County of Denver obtained from the Piton Foundation Neighborhood Facts database.
Our multivariate analyses revealed that although the characteristics of Latino homebuyers were similar at time of purchase, HOP program graduates were less likely to be housing burdened, received far superior loans at time of origination; and were less likely to move into subprime loans with refinancing. Moreover, they experienced significantly longer spells of homeownership --- on average 6.3 years, nearly two years longer than non-HOP homebuyers. Graduates were less likely to experience negative appreciation in home values and higher annualized rates of appreciation. The foreclosure rate among HOP graduates was 11% -- nearly half the rate for non-graduates. However, both HOP graduate and non-graduate homebuyers amassed substantial nonhousing debt post-purchase. Finally, using “difference in differences” modeling, we found that these program effects remained significant after controlling for changes in respondent's household and socioeconomic characteristics.
Conclusions and Implications
Our findings suggest that pre- and post-purchase homeownership counseling enhances the long-term sustainability of Latino homeownership.