A 1989 report by the Federal Reserve Bank of Boston identified major racial disparities in mortgage lending in the City of Boston that could not be explained by income, credit scores, or other objective underwriting factors. In response, city and state officials, community organizations, and major banking institutions joined together in 1990 to design and launch what is now the Massachusetts ONE Mortgage program. The program is built around a low down payment mortgage loan with discounted interest rates, a state funded loan loss reserve that eliminates the need for mortgage insurance, retention of servicing and credit risk by the originating lenders for the life of the loans, a rigorous homebuyer education requirement for all participating borrowers, and a network of post-purchase support including immediate intervention on delinquent loans. After twenty-five years of operation, $3.4 billion in mortgage originations and nearly 20,000 home purchases by low- and moderate-income homebuyers, the program has been a resounding success. About half of all loans have been to households of color, and about two-thirds of the home purchases have been in urban neighborhoods that are historically underserved by conventional credit. Delinquency rates have been comparable to prime loans, and foreclosure rates have been substantially lower than prime loans.
Clark L. Ziegler, Elliot Schmiedl & Thomas Callahan,
ONE Mortgage: A Model of Success for Low-Income Homeownership,
B.C.J.L. & Soc. Just.