Abstract

Portfolio Adjustment to Home Equity Accumulation among CRA Borrowers [PDF]
Authors: Allison Freeman & Bruce Desmarais
Journal of Housing Research Vol. 20, No. 2, (2011) pp. 141-160
Working Paper, July 2010

This paper identifies the financial implications of equity accumulation for low- and moderate-income (LMI) borrowers. The analysis examines (1) whether the accumulation of equity crowds out other investments, and (2) whether equity is substantially extracted from net worth through other borrowing activities. The data come from a unique panel study of Community Reinvestment Act (CRA) borrowers and matched renters. A copula modeling approach estimates the distribution of a financial portfolio; the distribution is used to simulate the hypothetical effect of equity accumulation on the portfolios of the matched renters. The analysis reveals no evidence that equity accumulation crowds out other investment activities, nor do we find excessive borrowing against equity by CRA beneficiaries.