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39 ยป VISIT US ONLINE @ DSNEWS.COM DOWN PAYMENT ASSISTANCE PROGRAMS' IMPACT ON DEFAULT RISK Down payment assistance programs have little impact on loan performance, according to a report released by the Harvard Joint Center for Housing Studies. e working paper, titled "A Cautionary Tale of How the Presence and Type of Down Payment Assistance Affects the Performance of Affordable Mortgage Loans," found little impact to home loan performance when down payment assistance was used. According to the study's authors, "Our multivariate analysis indicates that the receipt of DPA (down payment assistance) is not significantly associated with default risk. In particular, while grant assistance from a government or community organization is marginally significant as a predictor of default risk in one of our model specifications, this effect disappears altogether when racial controls are incorporated in the model. us, the receipt of DPA appears to be unrelated to default risk." Harvard's study also focused on minority homeowners, who disproportionately receive government-funded DPA. According to the study, while grant assistance from a government or community organization is marginally significant as a predictor of default risk in one of our model specifications, this effect disappears altogether when racial controls are incorporated in the model. Researchers conclude that with this in mind, the receipt of DPA appears to be unrelated to default risk. Another white paper, published by CBC Mortgage Agency, found that more than 90% of down payment assistance recipients would not have been able to purchase a home without down payment assistance. "Down payment assistance programs have come under attack lately, with some arguing that all down payment assistance is bad," stated Richard Ferguson, President of CBC Mortgage Agency. "is view is likely the result of pre-crisis down payment assistance programs in which property sellers were allowed to pay the buyer's down payment and raised the price of the property to cover the cost. ose seller-paid programs have been shut out of the market for years and are no longer an issue. Today's programs must be economically viable without the help of a home seller. In recent years, loan performance on transactions in which the borrower received down payment assistance has been far better compared to loans under the former seller-paid programs." THE STATE OF HOME EQUITY Homeowners are more likely to be equity- rich than seriously underwater, according to the latest Home Equity & Underwater Report from ATTOM Data Solutions. e report states that 26.7% of all mortgaged properties are equity-rich, a total of 14.4 million properties nationwide. e combined estimated amount of loans secured by those properties was 50% or less of their estimated market value. e majority of equity-rich ZIP codes in the nation (46 out of 50) were concentrated in California, mostly in the San Francisco Bay area. On the other hand, just 3.5 million homes mortgaged homes in Q 3 2019 were underwater, considered seriously underwater, with a combined estimated balance of loans secured by the property at least 25% more than the property's estimated market value. "e latest numbers reveal another profound impact of the extended housing boom, as far more homeowners find themselves on the right side of the balance sheet instead of the wrong side. is is a complete turnabout from what was happening when the housing market crashed during the Great Recession," said Todd Teta, Chief Product Officer with ATTOM Data Solutions. "ere are notable equity gaps between regions and market segments. But as home values keep climbing, homeowners are seeing their equity building more and more, while those with properties still worth a lot less than their mortgages represent just a small segment of the market." With the majority of these equity-rich areas concentrated in California, many states across the country are still filled with underwater mortgages. e highest share of underwater mortgages is in the South and Midwest, led by Louisiana (16.5% seriously underwater); Mississippi (15.8%); West Virginia (14.2%); Iowa (14.0%); and Arkansas (13.1%). Among 8,213 U.S. ZIP codes with at least 2,000 properties with mortgages, there were 160 ZIP codes where more than a quarter of all properties with a mortgage were seriously underwater. e largest number of those ZIP codes were in the Cleveland, St. Louis, Philadelphia, Chicago, and Milwaukee metropolitan statistical areas.