Expanding the Mortgage Credit Box: Lessons from the Community Advantage Program

The Great Recession has raised concerns about the promotion of homeownership to low- and moderate-income families. The subprime credit boom of the early 2000s was replaced with an overall credit retrenchment. The reforms to the housing finance system, begun with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, remain incomplete given the uncertain future of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”). In light of this uncertainty, can or should homeownership continue to be supported, and if so, in what way? In this paper, we examine one model of targeted mortgage lending for low-income households: the Community Advantage Program (CAP). Using more than ten years of longitudinal data, we summarize the design and key outcomes of CAP before and after the financial crisis, including mortgage performance, wealth accumulation, and the drivers of these outcomes. We then present lessons learned and suggest innovative approaches for the design of similar programs in the future