Discussion Papers
The following discussion papers examine issues of affordable housing, community and economic development, financial education, and consumer credit and payments that affect low- and moderate-income people and communities.
Community Reinvestment Act
This discussion paper provides evidence on the effects of the Community Reinvestment Act (CRA) on the mortgage market in the aftermath of the Great Recession. The study is accompanied by a practitioner’s summary, which provides applied findings for the community development practitioner audience.“Don't Know What You Got Till It’s Gone” — The Effects of the Community Reinvestment Act (CRA) on Mortgage Lending in the Philadelphia Market
(817 KB, 33 pages)
The Community Reinvestment Act (CRA), enacted in 1977, has served as an important tool to foster access to financial services for lower-income communities across the country. This study provides new evidence on the effectiveness of CRA on mortgage lending by focusing on a large number of neighborhoods that became eligible and ineligible for CRA credit in the Philadelphia market after 2014. The CRA effects are more evident when a lower-income neighborhood loses its CRA coverage, which leads to a 10 percent or more decrease in purchase originations by CRA-regulated lenders. Lending institutions not subject to CRA can substitute approximately half, but not all, of the decreased lending by CRA lenders. The increased market share of nondepository institutions in previously CRA eligible neighborhoods, however, was accompanied by a greater involvement in riskier FHA lending. This study demonstrates how different lenders respond to the incentive of CRA credit and how the use of metropolitan division median family incomes can generate unintended consequences on CRA lending activities.
A Practitioner’s Summary: The Effects of the Community Reinvestment Act (CRA) on Mortgage Lending in the Philadelphia Market
(9.37 MB, 20 pages)
This report summarizes major findings from the discussion paper “Don't Know What You Got Till It’s Gone” — The Effects of the Community Reinvestment Act (CRA) on Mortgage Lending in the Philadelphia Market for a community development practitioner audience.
Borrower Credit Access and Credit Performance After Loan Modifications
(625 KB, 46 pages)
While the preventive effect of loan modifications on mortgage default has been well-documented, evidence on the broad consequences of modifications has been fairly limited. Based on two unique loan-level data sets with borrower credit profiles, this study reports novel empirical evidence on how homeowners manage their credit before and after receiving modifications. The paper has several main findings. First, loan modifications improve borrowers’ overall credit standing and access to credit. Modifications that provide principal reduction, rate reduction, or greater payment relief, as well as those received by borrowers not in financial catastrophe, lead to a larger improvement in borrowers’ credit rating than others. Second, loan modifications lead to a slight increase in borrowers’ debts, primarily on home equity line of credit (HELOC) accounts and auto loans. Third, borrowers’ performance on nonmortgage accounts, however, has not been negatively impacted by modifications. This study demonstrates that interventions designed to improve household balance sheets could have a direct and sizable impact on borrower financial outcomes.
Gentrification and Residential Mobility:
The department has released a series of discussion papers on gentrification and residential mobility. Detailed descriptions and the full studies are available below:The Consequences of Gentrification: A Focus on Residents’ Financial Health in Philadelphia (597 KB, 40 pages)
There have been considerable debate and controversy about the effects of gentrification on neighborhoods and the people residing in them. This paper draws on a unique large-scale consumer credit database to examine the relationship between gentrification and the credit scores of residents in the City of Philadelphia from 2002 to 2014. The authors find that gentrification is positively associated with changes in residents’ credit scores on average for those who stay, and this relationship is stronger for residents in neighborhoods in the more advanced stages of gentrification. Gentrification is also positively associated with credit score changes for less advantaged residents (low credit score, older, or longer term residents, and those without mortgages) if they do not move, though the magnitude of this positive association is smaller than for their more advantaged counterparts. Nonetheless, moving from gentrifying neighborhoods is negatively associated with credit score changes for less advantaged residents, residents who move to lower-income neighborhoods, and residents who move to any other neighborhoods within the city (instead of outside the city) relative to those who stay. The results demonstrate how the association between gentrification and residents’ financial health is uneven, especially for less advantaged residents.
What Have We Learned About the Causes of Recent Gentrification? (678KB, 24 pages)
Since 2000, strengthening gentrification in an expanding section of cities and neighborhoods has renewed interest from policymakers, researchers, and the public in the causes of gentrification. The identification of causal factors can help inform analyses of welfare, policy responses, and forecasts of future neighborhood change. The authors highlight some features of recent gentrification that popular understandings often do not emphasize, and they review progress on identifying some causal factors. However, a complete account of the relative contribution of many factors is still elusive. The authors suggest questions and opportunities for future research.
Gentrification and Residential Mobility in Philadelphia (610 KB, 50 pages)
Gentrification has provoked considerable controversy surrounding its effects on residential displacement. Using a unique individual-level, longitudinal data set, this study examines mobility rates and residential destinations of residents in gentrifying neighborhoods during the recent housing boom and bust in Philadelphia for various strata of residents and different types of gentrification. We find that vulnerable residents, those with low credit scores and without mortgages, are generally no more likely to move from gentrifying neighborhoods compared with their counterparts in nongentrifying neighborhoods. When they do move, however, they are more likely to move to lower-income neighborhoods. Residents in gentrifying neighborhoods at the aggregate level have slightly higher mobility rates, but these rates are largely driven by more advantaged residents. These findings shed new light on the heterogeneity in mobility patterns across residents in gentrifying neighborhoods and suggest that researchers should focus more attention on the quality of residential moves and nonmoves for less advantaged residents, rather than mobility rates alone.
A Practitioner's Summary: Gentrification and Residential Mobility in Philadelphia (3.0 MB, 28 pages)
This summary of the report Gentrification and Residential Mobility in Philadelphia provides applied findings appropriate for a community development practitioner audience.
Gentrification Measure 
This Excel file provides data for our gentrification measure for the city of Philadelphia based on the Census 2000 tract definition, which identifies the tracts that were gentrifiable in 2000 and their various gentrification categories during the 2000-2013 period.
Home Mortgage Appraisals
The department has released a series of discussion papers on home mortgage appraisals. The first paper of the series, released in June 2014, focuses on the pattern of appraisal bias in the Third Federal Reserve District. The second paper, released in August 2014, focuses on the impact of the Home Valuation Code of Conduct on appraisal and mortgage outcomes nationally. Detailed descriptions and the full studies are available below:
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The Impact of the Home Valuation Code of Conduct on Appraisal and Mortgage Outcomes
The accuracy of appraisals came into scrutiny during the housing crisis, and a set of policies and regulations was adopted to address the conflict-of-interest issues in the appraisal practices. In response to an investigation by the New York State Attorney General’s office, the Home Valuation Code of Conduct (HVCC) was agreed to by Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency. Using unique data sets that contain both approved and nonapproved mortgage applications, this study provides an empirical examination of the impact of the HVCC on appraisal and mortgage outcomes. The results suggest that the HVCC has led to a reduction in the probability of inflated valuations, although valuations remained inflated on average, and induced a significant increase in the incidence of low appraisals. The well-intentioned HVCC rule made it more difficult to obtain mortgages to purchase homes during the housing price crash, possibly exacerbating the fall in prices. (708 KB, 36 pages) 
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The Pattern of Appraisal Bias in the Third District During the Housing Crisis
Appraisers have often been criticized for the inflated home values that were more prevalent during the housing boom, as well as overly conservative valuations during the housing bust. However, little research has been done to help understand how appraisal valuations respond to rapidly changing local market conditions and regulatory environments. This study provides an empirical examination of the pattern of appraisal bias during the housing crisis in the Third Federal Reserve District. Based on a unique transaction-level appraisal data set, this study evaluates how the lack of market activity, the concentration of foreclosures, and the increased use of appraisal management companies, as well as other factors, impact the incidence of low appraisals during the crisis. This study further examines the possible challenges created by low appraisals on the access to mortgage credit. (569 KB, 28 pages)
Residential Migration, Entry, and Exit as Seen Through the Lens of Credit Bureau Data (426 KB, 36 pages)
We analyze a large, nationally representative anonymized data set of consumers with a credit report from 2002 to 2010. This is a period that encompasses a boom and bust in consumer credit. Using census data, we classify consumers into four categories of relative neighborhood income and find that, over time, the number and proportion of consumers with a credit report fell in low- and moderate-income neighborhoods and rose in higher-income neighborhoods. Population trends evident from census data explain only a portion of these changes in the location of the credit bureau population. In most instances, the primary driver reflects residential migration from relatively poorer neighborhoods to ones with relatively higher incomes. Patterns of entry into or exit from the credit bureau population were correlated with the credit cycle, as well as with relative neighborhood income, resulting in slower sample growth in low- and moderate-income neighborhoods during periods of credit contraction. These results are interesting in themselves, but they are also important for interpreting empirical results estimated from credit bureau data.
FHA Lending: Recent Trends and Their Implications for the Future (9.08 MB, 62 pages)
This paper examines borrower characteristics over the course of the previous decade, a period in which the FHA experienced both a sharp decline in its market share and lending volume as the subprime segment expanded and a subsequent reversal of fortune as it emerged as one of the major supports of the housing market in the wake of the subprime collapse. The report provides information on trends in borrower cohorts along such dimensions as first-time homebuyer status, income, and FICO score; examines variations across regions in overall lending trends and borrower characteristics; considers what borrower patterns in post-subprime years may suggest about the nature of the FHA borrower pool going forward; and draws on the paper’s empirical findings to identify factors that policymakers might consider in evaluating how different proposals for the evolution of the housing finance sector might affect the nature of FHA lending.
Building Sustainable Ownership: Rethinking Public Policy Toward Lower-Income Homeownership (568 KB, 35 pages)
Based on a review and assessment of the literature on the costs and benefits of homeownership, provides a framework for public policy toward lower-income homeownership through an analysis of how those costs and benefits are affected by the homebuyer's income. Makes the case that public policy and resources should be directed less toward maximizing the number of lower-income homeowners and more toward maximizing the quality and stability of the homeownership experience for lower-income owners; offers a series of specific policy recommendations to that end.
Subprime Lending Over Time: The Role of Race (971 KB, 26 pages)
Analyzes the racial gap in subprime mortgages over time. The study estimates a portion of the gap that cannot be attributed to such characteristics as income, credit score, loan amount, degree of documentation, denial rate, residence in a minority tract, and debt-to-income ratio. It concludes that the unexplained portion suggests that bias in mortgage lending cannot be ruled out.
Economic and Social Impact of Introducing Casino Gambling: A Review and Assessment of the Literature (661 KB, 34 pages)
Reviews and assesses the existing literature on the potential economic impact of introducing casino gambling into a community or region, first by discussing the casinos’ effect on economic activity and growth within a community or region, and then by exploring their effect on government revenues. Also discusses the literature related to the economic impact of social costs widely associated with gambling, such as increases in crime, bankruptcy, and problem gambling.
Affordability and Availability of Rental Housing in Pennsylvania
Can be found in the Special Reports section of the website.
Alternative Financial Service Providers and the Spatial Void Hypothesis (3.8 MB, 33 pages)
Examines the use of alternative financial service providers (AFSPs) such as check-cashing outlets and pawnshops in Philadelphia, Montgomery, Delaware, and Allegheny counties. Also explores whether these providers are disproportionately serving minority and low-income areas.
Alternative Financial Service Providers and the Spatial Void Hypothesis: The Case of New Jersey and Delaware (936 KB, 18 pages)
Continues the use of the spatial void hypothesis methodology to analyze the location of alternative financial service providers, such as check cashing outlets and pawn shops, in New Castle County, Delaware, and Atlantic, Mercer, Monmouth, and Passaic counties in New Jersey. Also explores whether these providers are disproportionately serving minority and low-income areas.
Alternative Financial Vehicles: Rotating Savings and Credit Associations (ROSCAs)
(749 KB, 31 pages)
Describes how ROSCAs work and discusses the benefits that accrue to ROSCA participants and some of the costs they incur. Of particular interest is the introduction of a partial data set collected from a local ROSCA, which offers a glimpse of the capital costs ROSCA participants face and which could ultimately be contrasted with the capital costs faced by borrowers at mainstream financial institutions.
Financial Resources for the Environment: The Unsuccessful Attempt to Create a Private Financing Intermediary for Brownfield Redevelopment Projects (2.06 MB, 38 pages)
Analyzes an unsuccessful attempt to establish a financing intermediary for the development of environmentally contaminated property (commonly known as brownfields) in Pennsylvania. The proposed intermediary was called Financial Resources for the Environment.
Home Ownership Education and Counseling: Issues in Research and Definition
(109 KB, 31 pages)
Assesses existing research on the effectiveness of home-ownership education and counseling and opportunities for future research.
How to Spend $3.92 Billion: Stabilizing Neighborhoods by Addressing Foreclosed and Abandoned Properties (326 KB, 27 pages)
Gives guidance on the best use of funds appropriated by the Housing and Economic Recovery Act of 2008 for the purpose of assisting states, counties, and cities in their efforts to stablize hard-hit neighborhoods. The discussion paper was written by Alan Mallach, visiting scholar at the Bank.
The Impact of Housing Rehabilitation on Local Neighborhoods: The Case of the St. Joseph's Carpenter Society (2.92 MB, 25 pages)
Presents the results of a Philadelphia Fed study that analyzes whether the community development efforts of a nonprofit in Camden, NJ, have an effect on local neighborhoods.
Preserving Multifamily Rental Housing: Improving Financing Options in New Jersey (645 KB, 44 pages)
Summarizes the obstacles to financing small multifamily rental properties in New Jersey and makes recommendations for policies to address this credit need.
Preserving Multifamily Rental Housing: Noteworthy Multifamily Assistance Programs (289 KB, 34 pages)
Describes noteworthy multifamily-assistance programs around the country, including mortgage-insurance, secondary-market, technical-assistance, and tax-abatement programs. Produced by the Federal Reserve Banks of New York and Philadelphia.
