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Ohio State Study: Borrowers More Successful With State-Run Affordable Mortgages

In this Oct. 22, 2019 file photo, a sign stands outside a home for sale in southeast Denver.
David Zalubowski
/
Associated Press
In this Oct. 22, 2019 file photo, a sign stands outside a home for sale in southeast Denver.

Homebuyers who get their loans through state-run affordable borrowing programs seem less likely to default, according to new research from an Ohio State professor.

The Glenn College’s Stephanie Moulton joined researchers from Illinois and California to analyze Fannie Mae loan data from 2005-2014.

Every state has a housing finance agency to assist low- and moderate-income borrowers in purchasing a home. The research team compared households who got loans through their state HFA with similar households in the same area borrowing on the private market.

They found HFA borrowers were about 30% less likely to default or go into foreclosure in the first two years.

"There's been a lot of talk that where you get your loan doesn't matter – you just have to get a good loan," Moulton said in a university press release. "But at least with these lower-income borrowers, it does seem to matter where they get their loans."

Researchers say their results indicate the loan terms are less important than support services, like financial counseling, provided by state agencies.