The current -- and predicted future -- turmoil in the mortgage market highlights an important challenge to the American dream of homeownership: how to make certain that those who enter into homeownership are able to sustain that status, protecting family stability and building equity in a critical asset. Thirty years ago, those who owned homes had fixed rate mortgages and substantial equity, and foreclosure was a rare event. However, many Americans were denied the opportunity to become homeowners because of inefficient mortgage markets, underwriting based more on "rules of thumb" than analysis of the likelihood of loan repayment, and, frequently, discrimination.
By the end of the 1990s, positive changes in all three dimensions helped raise America's homeownership rate, especially for lower-income and minority families. But in part because of excesses that have encouraged and enabled many to support homeownership based solely on debt, without building assets or equity, we are now at serious risk of losing many of those gains.
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