Why The U.S. Mortgage Market Is Broken

For decades, Americans have relied on mortgages to purchase a home. But experts say that several aspects of today’s mortgage market including cost, the lack of small-dollar loans and lender bias have all greatly hindered Americans from owning their own property. Can the U.S. do anything to fix the broken system and allow mortgages to improve homeownership in America? Watch the video to find out.

Editor’s note and correction (May 27, 2022): A previous version of this video misstated the percentage of nationwide home sales below $100,000 in 2019. The Urban Institute is recalculating its proprietary data after an error was discovered. A similar analysis from the National Association of Realtors shows that the 2019 figure was 8.4%.

High home prices aren’t the only reason behind dwindling homeownership in the U.S. Banks and financial institutions aren’t issuing enough small-dollar mortgages that help families with modest incomes to purchase a property.

“It is particularly hard for people who are buying smaller houses with smaller mortgages to find a lender and to get that mortgage,” said Mike Calhoun, president of the Center for Responsible Lending. “And they also surprisingly are more expensive.”

And the issue has been getting worse. The value of mortgage loans between $10,000 and $70,000 and between $70,000 and $150,000 dropped by more than 53% and over 21%, respectively, from 2011 to 2021, according to research by Attom Data Solutions. Meanwhile, the value for loans exceeding $150,000 rose by a staggering 240% plus in the same period.

Another study found that denial rates for small-dollar loans were notably higher than denial rates for larger loans. And it’s not because these loans are riskier. Accompanying research found that applicants for small-dollar loans had similar credit profiles to applicants for larger loans.

The real reason is profit.

“One barrier for small-dollar mortgages is that it’s just not as profitable for lenders to do them,” according to Janneke Ratcliffe, vice president of the Housing Finance Policy Center at the Urban Institute. “Lenders get all their fees and interest based on the loan amount so they’re going to get a lot less revenue on a $70,000 mortgage than they are on a $700,000 mortgage.”

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Why The U.S. Mortgage Market Is Broken

[eddie]

America: you can’t afford a $1500 mortgage so pay $2500 rent

[severtone]

I am 42 now. Finally, my life is well put together enough for me to consider buying a house for my young family and then now all this: Low inventory, supply chain issues, rising mortgage rates, competing with whole corporation that are gobbling up the market and pricing me out, high inflation, algorithms buying houses in the scarce market, bidding wars etc....the list is endless. What a time to live.

[lianalonge]

11 years ago, my landlord invited me into their house as I was dropping off my rent check, to show me her newly renovated kitchen. I thought to myself, “I paid for this”. 4 months later I bought my first home at a 30 year fixed, 4% rate. My DTI is currently 14% and CU at 1%.

[kabm]

There is no housing shortage, there is corporate greed buying up available house to turn housing into a revenue stream. This also applies to individual investors but on a smaller level

[hannahschultz]

Successful people don't become that way overnight. What most people see at a glance- wealth, a great career, purpose-is the result of hard work and hustle over time. I pray that anyone who reads this will be successful in life..

[ancel]

I paid $2700 down payment in 2020, $17, 000 in closing cost. What wrong with that? I’m thankful for our decision to purchase a house, but closing costs are ridiculous.

[John]

In the old days a man could build a livable home in a few summer seasons. Now it takes 30 years to pay off a mortgage. It ain't rocket science.

[Bradimoose]

So in a place like Tampa where 30% of sales are investors paying cash, raising the interest rates just makes them more unaffordable and more guaranteed renters for the corporate owners. I know people with 100k to put down, good credit and 200k combined income in St. Pete that cant get a home.

[llywelyngruffydd]

It's like every institution has failed and yet the whole thing keeps grinding on and on and on. No light at the end of the tunnel.

[ApasionadoPorElFutbol]

I find it very contradictory saying that it is the shortage of supply that’s causing prices to go up, and at the same time stating that you should open up ways and be more lenient with regulations for people to access a mortgage credit. More demand will cause prices to continue to go up, hence they will say again that the system is not working for the less favorable.

Also, there is no correlation between wealth credit scores - Stunned

[markfornefeld]

Having investors buy all these homes and run them out at such high prices could actually endanger the community that the people are trying to live in through property taxes becoming overdue and delinquent which causes Police to not get paid from property taxes

[Chew]

I live in CA and it has been like this since forever. I guess I am just used to it.

[quin]

*Great video. We all strive towards financial stability and a better life. It is easy to achieve this through the right investment, by living frugally and budgeting. I’m glad I learnt early in life to work hard for financial freedom*

[alexyoung]

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[oneiljerry]

My wife and I did very well in the amount of money that we amassed for retirement. Well over 80% of that money was made because of taking advantage of buying high-end stocks at a deep discount during the Great Recession. 2009 I fired the stockbroker got rid of all mutual funds and bought individual dividend stocks. Be patient don't get scared and do your homework and you can make a killing.

[MrSupernova]

The US needs to remove institutional investors from purchasing homes for profit. Also, house purchases should have a limit of 1-2 per state. I assure you, that housing prices will plummet when you remove the greedy vultures from the system.

[paulalonso]

Money is an issue that everyone has for a better and
luxurious ife, Life was hard for me until I started
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[garciamiller]

My Greatest Happiness is the $28, 000 biweekly profit I get consistently.

[kevinortizgomez]

Too many "investors" we know who they are: the flippers, the multiple streams of income, the generational wealth gurus. Then you add the professionals: banks, mortgage companies and you get this result

[edwardspencer]

Despite the economic crisis, this is a good time to invest Dogecoin, bitcoin and forex. They are really profitable