CFPB Could Improve Access to Safe, Affordable Mortgages for Low-Cost Homes

On Dec. 28, The Pew Charitable Trusts responded to the Consumer Financial Protection Bureau’s request for information regarding ways to facilitate mortgage refinances for borrowers with relatively small loan balances.

Research shows that only about a third of low-cost homes are purchased using mortgages and that, due in part to a lack of small mortgages, some homebuyers turn to alternative financing arrangements—such as personal property loans for manufactured homes, lease purchase agreements, and land contracts—which often come with added risks and costs. The shortage of small mortgages limits refinancing opportunities not only for consumers already using mortgages, but also for borrowers looking to move out of these costly alternative arrangements.

Pew’s letter highlighted the barriers that lenders face in originating small mortgages and the different outcomes that families experience when they cannot access a mortgage. The letter encouraged the bureau to consider targeted and streamlined refinance programs for small mortgage borrowers; to expand its focus to include the creation of new refinancing products for borrowers using alternative financing; and to work with other agencies to determine whether current programs present opportunities to streamline the pathway from land contracts into mortgages.