Assessing the Performance of Affordable Loans: Implications for Research and Policy

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Abstract
In recent years, mortgage originators, government-sponsored enterprises, and others have changed underwriting guidelines to make borrowing more affordable to traditionally underserved populations such as low-income and minority households. Unfortunately, there is anxiety about the performance of these affordable loans. The key concern stems from the fear that affordable loans may be riskier than other loan products. This article reviews the research evidence and explores two types of reasons for the conflicting nature of that evidence. These reasons include the practices of the institutions involved in mortgage lending and methodological considerations. Implications for research and policy are derived from the review.