Small-Dollar Mortgages: A Loan Performance Analysis

Brief

Small-Dollar Mortgages: A Loan Performance Analysis

Abstract

There is a significant lack of mortgage financing available for low-cost homes, which many first-time homebuyers and lower income families rely on to move into homeownership. Earlier research on small-dollar mortgages explains the market deficit and landscape. In this study, the researchers show that the commonly held perception that small-dollar mortgages are riskier than larger mortgages is not accurate. While significantly less prevalent, these loans perform like larger mortgage loan and the borrowers of small-dollar mortgages have comparable credit profiles to those of all mortgage borrowers. This analysis suggests that it is not appropriate from a risk management perspective to charge higher rates or risk premiums on small-dollar loans. Increasing the availability of these small dollar mortgages could help more households achieve homeownership.

Centers

Cross-Center Initiative

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