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Spring 2003 Enhancing Mortgage Credit Availability Among Underserved and Higher Credit-Risk Populations: An Assessment of Default And Prepayment Option Exercise Among FHA-Insured Borrowers

Yongheng Deng and Stuart A. Gabriel
The extension of mortgage credit to underserved, minority, and higher credit-risk populations has been a topic of discussion among researchers and policymakers in recent years, as both the Clinton and Bush administrations have articulated policies that have sought to advance the homeownership opportunities of underserved and minority groups. Research accordingly has sought to identify the determinants of persistent disparities in both mortgage origination and homeownership attainment among targeted and non-targeted groups, (see, for example, Painter, Gabriel and Myers [2001], Coulson [1999], Deng, Quigley and Van Order [1996], and Rosenthal [2001]). On the mortgage side, studies have focused largely on the role of borrower credit risk and credit constraint in the analysis of mortgage loan origination and performance (see, for example, Ambrose and Capone [1998, 2000], Ondrich, Ross and Yinger [2000], Berkovec, Canner, Gabriel, and Hannan [1998], Avery, et al. [1996], Goering and Wienk [1996], Munnell, et al. [1996], Canner, Passmore, and Smith [1994], and Gabriel and Rosenthal [1991]).