Weathering the Storm

Have IDAs Helped Low-Income Homebuyers Avoid Foreclosure?

Weathering the Storm

Have IDAs Helped Low-Income Homebuyers Avoid Foreclosure?

Ida Rademacher 

and Kasey Wiedrich, CFED

Signe-Mary McKernan, Caroline Ratcliffe 

and Megan Gallagher, The Urban Institute
Acknowledgments

The authors gratefully acknowledge the cooperation and work of the program staff at the six IDA programs 

that participated in this research, and in particular, Gwendy Donaker Brown, Kerry Cook, Julian Huerta, Amy 

Jo Kennedy, Dan Kornelis, Karen Lyons Serna, Marcy Meyer and Deltrise Sanford. We thank Ashley Arrington 

and David Price for their excellent research assistance and Robert Lerman, Doug Wissoker, Steve Crawford, 

Leigh Tivol and Lindley Higgins for their helpful comments and suggestions. In addition, we value the input 

of participants at the 2009 Association for Public Policy Analysis and Management Fall Conference and an 

Opportunity and Ownership seminar. We would also like to recognize Bob Friedman for inspiring this project. 

This research was made possible through support from NeighborWorks America and the Ford Foundation. 

The findings and conclusions presented are those of the authors, and do not necessarily reflect the opinions of 

CFED, the Urban Institute, their boards, or their sponsors.
Weathering the Storm

Have IDAs Helped Low-Income Homebuyers Avoid Foreclosure?

Weathering the Storm

Have IDAs Helped Low-Income Homebuyers Avoid Foreclosure?

Ida Rademacher 

and Kasey Wiedrich, CFED

Signe-Mary McKernan, Caroline Ratcliffe 

and Megan Gallagher, The Urban Institute

April 2010
I. Introduction 

Homeownership rates among low-income 

Americans reached historic highs in the middle 

part of this decade, extending the realization 

of the American dream to millions more lowincome families than ever before. The rise in 

homeownership was widely viewed as a positive 

trend, largely because homeownership has 

traditionally been the primary means through 

which low-income households build wealth. 

Homeownership is also associated with a host of 

positive social outcomes relating to health and wellbeing, civic engagement, employment stability, and 

children’s educational performance. 

But as the recent subprime and foreclosure crisis has 

shown, homeownership is by no means a risk-free 

proposition or a guarantee that individuals who 

become homeowners will remain homeowners 

and build wealth. Low-income homeowners 

have a high likelihood of returning to renting, 

and many factors come into play in determining 

whether homeownership is ultimately a wealthbuilding strategy (Boehm and Schlottmann 2004; 

Reid and Laderman 2009; Shlay 2006). In addition 

to length of tenure, other variables that appear to 

impact whether homeownership leads to wealth 

accumulation are the use of a down payment, the 

type of mortgage instrument used to finance the 

purchase, and the appreciation rate for the property 

over time (Bostic and Lee 2008; Schlay 2006; Turner 

and Luea 2009).

Individual Development Account (IDA) programs 

incorporate several elements that are associated 

with successful homeownership outcomes. IDAs are 

matched savings accounts designed to help lowincome families save and build assets. At the time of 

withdrawal, IDAs provide matching funds, typically 

$2 for every $1 saved, if they are used by the saver 

to purchase appreciable assets, such as a home, a 

business, or higher education. IDA programs for 

homebuyers include these elements: 

n Savings incentives in the form of matching funds 

that can be used along with personal savings as a 

down payment, 

n Financial education and prepurchase 

homeownership counseling, and 

n Oversight and guidance in choosing affordable, 

nonpredatory mortgage products. 

Congress has provided federal funding for IDAs 

in recent years after the passage of the Assets for 

1
Weathering the Storm

Have IDAs Helped Low-Income Homebuyers Avoid Foreclosure?

Independence Act (AFI) in 1998. Since then, more 

than 6,000 individuals have used AFI funds to help 

finance a home purchase (U.S. DHHS, n.d., 53). 

This study examines whether IDA homebuyers 

have better homeownership outcomes than other 

low-income households. Our hypothesis is that 

IDAs help create sustainable homeownership 

opportunities because they provide the structure and 

the support necessary for low-income households to 

succeed. The research is designed to provide insight 

and answers to the following questions:

n What are the economic and demographic 

characteristics of IDA homebuyers? In what ways 

are they similar to and different from other lowincome homebuyers?

n What loan terms do IDA participants receive? 

How do these compare with loan terms for other 

low-income homebuyers?

n What are foreclosure rates among IDA 

homebuyers? How do these compare with 

foreclosure rates among other low- and moderateincome homebuyers?

To answer these questions, we worked with six 

IDA programs across the country to construct a 

dataset based on administrative records of 831 

individuals who purchased homes with IDA funds 

between 1999 and 2007. We conducted property 

searches in March and April 2009 to verify the 

current homeownership status of the sample (e.g., if 

homebuyers were still in their homes, had defaulted 

on their mortgage, or had foreclosed). We compare 

loan terms and foreclosure outcomes for the IDA 

homebuyer sample to comparison groups of other 

low-income homebuyers who purchased homes 

in the same counties and during the same time 

period. The comparison groups are constructed from 

Home Mortgage Disclosure Act (HMDA) data and 

from mortgage performance data obtained from 

NeighborWorks America.

IDA homebuyers in our sample were significantly 

more likely to be minority and female than all 

low-income homebuyers who purchased homes in 

the same geographies over the same time period. 

Yet, the IDA homebuyers were much less likely to 

obtain high interest rate mortgage loans. Our most 

important result is that IDA homebuyers were far 

less likely to face foreclosure than the comparison 

group. Foreclosure rates for IDA homebuyers were 

one-half to one-third the rate for other low-income 

homeowners in the same communities. 

The findings suggest that participation in an IDA 

program with its related services and restrictions 

can improve homeownership outcomes for lowincome households. One caveat is that since IDA 

participants self select into the program, IDA 

homebuyers are not a random sample of all lowincome homebuyers. That is, IDA homebuyers 

may be people who are more likely to be 

successful homeowners even without participation 

in the IDA program. While this is a possibility, our 

analysis shows that IDA homebuyers are more 

likely than other low-income homebuyers to be 

minority and female, two groups that generally 

have subpar rates of successful homeownership. 

Also, the magnitude of the difference in outcomes 

between IDA homebuyers and other low- and 

moderate-income homebuyers indicates that IDA 

participation contributed to better homeownership 

outcomes. 

The remainder of this paper is organized into the 

following sections. Section 2 provides an overview 

and conceptual framework that explains the design 

of IDA programs. Section 3 introduces the study 

methodology and the datasets that are used in this 

research. Section 4 presents the research findings 

and analysis for each of the main research 

questions, and section 5 concludes the paper with 

a further discussion of the findings and implications 

for policy. 

2
II. Background and Conceptual 

Framework 

The literature suggests that participating in an 

IDA program increases homeownership (e.g., 

Mills, Gale, et al. 2008; Mills, Lam, et al. 2008) 

but does not provide evidence on whether IDA 

programs promote successful homeownership. 

IDA programs are hypothesized to support and 

promote successful homeownership and wealth 

building through three primary mechanisms: 

(1) the matched savings incentive, (2) financial 

education and homeownership counseling, and (3) 

program oversight (Figure 1). We discuss these three 

mechanisms in turn below.

Matched Savings Incentive

Program matching funds create an incentive to 

participate in an IDA program and to save once 

in the program. Participants save on a monthly 

basis and are generally in the program for 18 

months to three years. They receive a match for 

every dollar saved if the savings are used for 

first-time homeownership or another approved 

asset purchase. The combined participant savings 

and program match likely increase the down 

payment on a home.1

 An increased down payment 

is hypothesized to make homeownership more 

likely because not having enough wealth to finance 

a down payment is typically the largest constraint 

on homeownership for low-income families 

(Galster and Santiago 2008). It should also make 

homeownership more successful. A larger down 

payment increases initial home equity and may 

result in more affordable loan terms, which should, 

in turn, lead to fewer delinquencies and foreclosures 

and increased wealth. Bostic and Lee (2009) 

simulate wealth gains from homeownership versus 

renting and find that the extent of the wealth gain 

is a direct function of the initial down payment. 

They conclude that “homeownership is clearly a 

more valuable asset-building tool if a household is 

able to acquire home equity early in the tenure of 

homeownership” (236). 

Program Inputs Home Purchase

Process

Successful

Homeownership

Matched Savings

Incentives

Financial Education

& Homeownership

Counseling

Program 

Oversight

Downpayment

Affordable Loan

Terms

Lower Risk

Investment

Fewer 

Delinquencies

& Foreclosures

Wealth

Building

Figure 1: Conceptual Framework

How IDA Programs Can Affect Homeownership Outcomes

3
Weathering the Storm

Have IDAs Helped Low-Income Homebuyers Avoid Foreclosure?

Program matching funds incentivize 

homeownership and may make homeownership 

available to people who otherwise would not buy 

a home. Conceptually, this increase in 

homeownership could result among people ready 

for homeownership (e.g., with stable employment) 

and people not ready for homeownership (e.g., 

without stable employment). As a result, IDA 

programs could induce both good and bad 

homeownership outcomes among participants, 

resulting in increased delinquencies and foreclosures 

for some. We expect the good outcomes to dominate 

because homeownership counseling provided by 

IDA programs (and discussed in the paragraph 

below) should help programs identify which 

individuals would be successful homeowners 

and discourage individuals not ready for 

homeownership from buying. IDA programs may 

also improve participant outcomes if the program 

counseling convinces participants who incorrectly 

thought they were ready for homeownership to 

postpone or not purchase.

Financial Education and Homeownership 

Counseling

IDA programs require participants to attend financial 

education classes and many also require assetspecific counseling, such as homebuyer counseling. 

All six programs in our study require both, either in a 

classroom setting or through one-on-one counseling. 

General financial education covers credit and credit 

repair, which could lead to higher credit scores at 

the time of the home purchase. Homeownership 

counseling, on the other hand, outlines the basic 

steps of home purchasing and qualifying for a loan. 

Financial education and homeownership counseling 

are hypothesized to reinforce savings behavior 

and thus increase down payment. They are 

also hypothesized to improve the risk profile of 

participants over time, ultimately enabling them to 

qualify for better loan terms and thus a lower-risk 

investment. Longitudinal research on IDAs shows 

that program participation significantly increased 

the clearing of old debts as compared to a control 

group after 18 months (Grinstein-Weiss et al. 2008). 

In general, the literature finds positive relationships 

between financial education and participant 

savings, as measured by average monthly net 

deposits (Clancy, Grinstein-Weiss, and Schreiner 

2001; Schreiner and Sherraden 2007a; Zhan 2003) 

with potentially diminishing returns to financial 

education after 10 to 12 hours (Schreiner, Clancy, and 

Sherraden 2002). The literature also suggests that 

prepurchase homeownership counseling reduces the 

probability of default, especially if delivered one-onone (Galster and Santiago 2008).

Program Oversight

IDA programs monitor the specific uses of program 

match funds for home purchases and other asset 

purchases. Although restrictions vary across IDA 

programs, many place restrictions on loan types 

and terms. For example, one of the programs in 

the study restricts debt-to-income ratios, loan 

types, terms, fees, housing prices, and sometimes 

neighborhood. Two programs began to require fixed 

rates or affordable loans in response to the rise of 

predatory and subprime loans in 2006. A few of the 

programs do not have written requirements, but 

one did issue guidelines in 2005 and others rely 

on their relationships with participants and their 

educational components to steer participants toward 

smart choices. Some of the programs also offer 

loan products or have relationships with lenders 

who offer loans and additional down payment 

assistance products to participants. Participants 

are not required to use these products, but they are 

intended to provide affordable options for interested 

participants. This program oversight may be an 

important component of IDA programs. Recent 

analysis of HMDA and loan performance data in 

California suggests that mortgage market channels 

play an important role in the likelihood of receiving 

4
a higher-priced loan and ending in default. Black 

and Hispanic homebuyers in California had access 

to very different mortgage markets – markets that 

resulted in higher-priced loans – as compared with 

white homebuyers in California (Reid and Laderman 

2009). IDA programs may provide access to alternate 

mortgage markets with lower-priced loans.

Contact with program staff and necessary review and 

approval of loan terms prior to release of matching 

funds provide additional guidance and oversight. 

This program oversight is hypothesized to increase 

the likelihood that a participant receives affordable 

loan terms (reducing the likelihood of predatory 

lending) and to lower property risk investment.

Overall, we hypothesize that participation in an 

IDA program, with its matched savings incentive, 

financial education, homeownership counseling, and 

program oversight, will lead to a down payment 

that starts participants with equity in the home, 

more affordable loan terms, and a lower investment 

risk, which in turn lead to fewer delinquencies and 

foreclosures. This should increase the odds that 

homeownership will in fact build wealth in a lowincome population. 

The literature brings empirical evidence to bear on 

some of these hypotheses and this paper contributes 

further. Previous studies have found a positive 

relationship between IDA program participation 

and homeownership rates though no statistically 

significant relationship between IDA program 

participation and net worth, at least in the first 

three to four years after participation (e.g., Mills, 

Gale, et al. 2008; Mills, Lam, et al. 2008; Schreiner 

and Sherraden 2007b). This study contributes 

to the literature by examining the relationship 

between IDA program participation, loan terms, and 

homeownership success, as measured by foreclosure 

rates. No other study (known to the authors) has 

looked at these outcomes.

III. Data and Methods

Our analysis relies on three main sources of data. 

First, we have data on a sample of IDA homebuyers, 

including program and outcome information. In 

addition, we construct comparison samples from 

HMDA data and mortgage performance data 

obtained from NeighborWorks America. These three 

sources of data are described in turn below.

IDA Homebuyer Dataset

Data on IDA homebuyers were collected from six 

IDA programs located in six states: California, 

Indiana, New Hampshire, North Carolina, Ohio, 

and Texas.2

 Each IDA program provided us with 

administrative data that include demographic 

characteristics, income, information identifying 

the purchased property, and mortgage loan 

characteristics for IDA participants who purchased 

homes with an IDA between January 1999 and 

December 2007. One limitation is that not all 

information fields are available for all homebuyers, 

particularly data on mortgage loan type and terms, 

as most of the programs had not been tracking that 

information independently. The final sample, after 

removing records with a missing purchase date or 

location, consists of 831 homeowners who purchased 

homes in 17 states between 1999 and 2007. The 

number of IDA homebuyers in the six programs 

increased steadily from 1999 to 2004 and ranged 

between 134 and 160 home purchases in each of the 

subsequent years (Figure 2). Using the identifying 

information provided by the programs, we 

conducted online searches of county public records 

in March and April 2009 to verify if homeowners 

were still in their homes, had defaulted on their 

mortgages, or had foreclosed. The homeowner status 

was verified for 803 of the 831 IDA homebuyers.3

The six IDA programs were selected based on 

number of homeowners, geographic diversity, 

and access to public records in their service area. 

The IDA programs are all large, well-established 

5
Weathering the Storm

Have IDAs Helped Low-Income Homebuyers Avoid Foreclosure?

programs with an average of 139 homeowners per 

program in the sample. Three of the programs are 

affiliated with NeighborWorks America, a national 

network of community-based nonprofits that focus 

on community revitalization and the production of 

affordable housing. Additionally, three programs 

are community development financial institutions 

(CDFIs) – private financial intermediaries 

identifying and investing in opportunities to benefit 

low-income and low-wealth people. Half of the 

programs operate as stand-alone IDA programs – 

they manage all elements of the program in-house 

– and half operate as collaboratives – arrangements 

of several organizations working together with 

responsibility for different aspects of the program, 

such as recruitment, case management, or account 

management. Homeownership was the primary 

focus of the majority of the programs; in five of six 

programs, between 50 percent and 100 percent of all 

IDA participants were saving for homeownership 

rather than other potential uses such as small 

business or education. 

Program elements varied slightly between the six 

programs, but all contained the basic elements 

of matched savings, financial education, and 

homebuyer training. Match rates varied between 

and within programs, but the most common match 

rates were 2:1 and 3:1. In each of the programs, 

participants were required to attend general 

financial education classes that covered topics 

such as budgeting, credit and credit repair, and 

goal setting. Each participant wanting to use her 

or his IDA to purchase a home was also required 

to attend homeownership training, which ranged 

from a maximum of 10 hours, held for two hours 

per week for five weeks, to a minimum of one twohour training. In addition, many of the programs 

offered one-on-one counseling, and a few of the 

programs required ongoing counseling, from 

0

50

100

150

1999 2000 2001 2002 2003 2004 2005 2006 2007

200

Number of homes purchased

160 160

134

154

106

66

11

2

38

Figure 2: Number of Homes Purchased by IDA Homebuyers, by Year

Source: Authors’ tabulations of IDA program data. 

6
a minimum of one session to monthly sessions 

with a counselor. Programs that did not offer 

homeownership counseling in-house provided 

referrals to local NeighborWorks organizations or 

other homeownership counseling providers. 

Participants in IDA programs make a conscious 

decision to apply for the program (i.e., they are 

a self-selected group) and then go through a 

screening process before they are accepted into the 

program and can begin saving. Thus, our data are 

not a random sample of low-income homebuyers. 

Generally, participants are aware of and apply to 

IDA programs through relationships they have with 

the organization or one of its partner organizations, 

typically as a client or an employee. For example, 

the program in Austin, Texas (Foundation 

Communities), primarily recruits IDA participants 

from the tenants of the rental properties it manages. 

Even if a program is open to the public, potential 

participants often become clients of the organization 

or its partners. Eligibility for an IDA program is 

based primarily on income, and in most programs, 

participants are eligible if their earned income is 

below 200 percent of the federal poverty level. 

However, some programs have funds that allow 

individuals to participate if they have incomes as 

high as 60 percent or 80 percent of area median 

income. Other eligibility criteria include a screening 

to ensure that applicants are able to meet their basic 

needs on their income or a credit check to determine 

if applicants’ credit issues can be resolved during 

their time in the program. 

Comparison Datasets

We use two data sources to compare IDA 

homebuyers with other low-income homebuyers. 

HMDA data are used to compare demographic 

characteristics and loan terms. Data obtained from 

NeighborWorks America on mortgage performance 

are used to compare foreclosure rates. The two data 

sources are necessary for the analysis because the 

HMDA data do not include foreclosure information 

and the mortgage performance data do not provide 

homebuyers’ demographic characteristics. For 

both the HMDA and mortgage performance data, 

we use the available information to construct 

comparison samples that include homebuyers 

who are similar to our IDA homebuyer sample. We 

conduct comparisons between homebuyers in the 

IDA sample and the two comparison samples by 

calculating summary statistics of homebuyer and 

loan characteristics in each of the datasets. We also 

ran statistical tests to assess whether differences 

between the IDA and HMDA groups and the 

IDA and mortgage performance data groups are 

statistically significant.4

 The next sections describe 

each of these data sources, along with the criteria we 

used to construct the comparison sample. 

Home Mortgage Disclosure Act Data 

The HMDA data are used to describe the 

demographic characteristics of low-income 

homebuyers and the terms of their loans.5

 We use 

HMDA data from 1999 through 2007, which matches 

the home purchase dates of homebuyers in our IDA 

sample. HMDA data include homebuyers’ gender, 

race, ethnicity, and income at the time the loan is 

originated. These data also provide information on 

homebuyers’ basic loan characteristics including 

loan amount, loan type, and whether the loan has 

a high interest rate. Four loan types are identified 

in the data: conventional, FHA insured (Federal 

Housing Administration), FSA/RHS guaranteed 

(Farm Service Agency/Rural Housing Service), and, 

VA guaranteed (Veteran Administration). The benefit 

of FHA, FSA/RHS, and VA loans over conventional 

loans is that they can carry lower interest rates and 

down payments for first-time homebuyers.

Since 2004, the HMDA data identify high interest 

rate loans by flagging rates that are 3 percentage 

points higher than the prime rate for primary 

mortgages. This flag is often an indicator of a 

7
Weathering the Storm

Have IDAs Helped Low-Income Homebuyers Avoid Foreclosure?

subprime loan.6 Prior to 2004, the HUD subprime 

list is generally used to identify loans from banks 

with disproportionate shares (at least 50 percent) 

of subprime loans. While the subprime list does 

not specifically identify subprime loans, it does 

indicate loans that are more likely to be subprime. 

In our analysis, we examine two measures that 

approximate subprime loans in the HMDA data: 

(1) percent of loans identified as high interest rate 

loans using data from 2004 to 2007 and (2) percent 

of loans from banks with a disproportionate share of 

subprime loans from 1999 to 2007.7

To provide a comparison group for our IDA 

homebuyers, we select loans from HMDA that 

originated in the same counties and in the same 

years as the IDA home purchases.8

 For each year 

represented in the IDA homebuyer sample, we keep 

HMDA loans from only those counties in which 

IDA homebuyers purchased homes. We further 

limit the sample to loan originations for purchase 

of owner-occupied one- to four-unit homes. These 

limitations are made to create a close comparison to 

the IDA homebuyer sample, which does not include 

refinances, investment properties, or manufactured 

or multifamily properties. 

Since the IDA homebuyer sample is a relatively 

low-income sample, we limit the HMDA sample 

to homebuyers with incomes below 250 percent 

of the federal poverty level (for a family of three). 

This threshold was chosen to reflect the incomes 

of IDA participants 18 months to three years after 

program entry, when most IDA participants in 

the sample bought their homes.9

 According to 

the Assets for Independence Impact Study, real 

earnings increased by nearly 30 percent between 

the first and third years of the program (Mills, Lam, 

et. al. 2008, 27). Using these findings, we assume 

an upward income adjustment of 25 percent from 

200 percent of the federal poverty threshold to 250 

percent of the federal poverty threshold. Using 

this higher income cutoff (250 percent versus 200 

percent of the federal poverty threshold) produces 

a somewhat more advantaged comparison group 

that is less likely to experience low-quality mortgage 

products and foreclosures. By erring on the side of 

a more advantaged comparison group, our results 

are conservative and may understate the potential 

benefits of participating in an IDA program.

Together, our selection criteria yield a HMDA 

sample of 259,922 loans, which we compare to 

our IDA homebuyers. One caveat is that our IDA 

homebuyer loans are likely present in the HMDA 

comparison sample. However, this does not drive 

the overall HMDA sample characteristics, since IDA 

homebuyers represent only 0.3 percent of the HMDA 

comparison sample. In conducting our analysis, we 

use weights to make the HMDA sample match the 

proportional representation of each county and year 

combination in the IDA sample. 

Mortgage Performance Data

Foreclosure rates among IDA homebuyers are 

compared with foreclosure rates among homebuyers 

in the mortgage performance data obtained from 

NeighborWorks America. The mortgage data 

include extensive information on loan and property 

characteristics as well as the borrower’s credit score. 

We use loan value and credit score to approximate 

our low-income IDA homebuyer sample. Foreclosure 

is the outcome of interest. The data provide monthly 

information on whether individual loans are current, 

delinquent, in foreclosure, or paid in full. 

The mortgage performance data cover a large 

portion of the overall mortgage market, but they 

underrepresent subprime loans. As a result, our 

comparison group likely represents loans from a 

somewhat more advantaged group of homebuyers, 

loans that likely have more advantageous terms 

and lower foreclosure rates than the full population 

of loans. Using this somewhat more advantaged 

8
comparison group will likely understate the 

potential benefits of participating in an IDA program 

on participant foreclosure rates.

To produce a comparison sample for our IDA 

homebuyer loans, we select loans that originated in 

the same places and in the same months between 

1999 and 2007 as the IDA home purchases.10 For 

each month and year combination represented in 

the IDA homebuyer sample, we keep loans from 

the comparison data from only those counties in 

which IDA homebuyers purchased homes. We select 

loans for first mortgages for purchases of primary 

residences and create weights to adjust for the 

proportional representation of each county in each 

month and year combination in the IDA sample. 

This yields a sample of 281,655 loans. Data for each 

loan in this sample appear for the first time during 

the month of origination and then again monthly 

until the loan is voluntarily or involuntarily paid off. 

In this analysis, we examine the rate of loans in the 

foreclosure process (including presale, post sale, and 

real estate owned foreclosures) between the date of 

loan origination and April 2009.

Loans present in the mortgage performance data 

include homebuyers from across the income 

spectrum. Identifying loans of low-income 

homebuyers is difficult because mortgage holders’ 

income is not available in the file. Loan amount and 

homebuyer FICO score are available, however, and 

we use these together to proxy homebuyer income. 

Loan amount and FICO score are assumed to reflect 

homebuyers’ income via their purchasing power and 

credit limitations, respectively. We use both because 

while loan amount alone likely reflects purchasing 

power well in the IDA sample (which is known to 

be low income), it likely reflects it less well in the 

mortgage performance data. This is because some 

low loan amounts in the mortgage performance 

data could be from higher income families who 

have large down payments (e.g., from high levels 

of saving or rolling over equity from a prior home). 

We construct three comparison groups from the 

mortgage performance data, which likely provide 

an upper and lower bound for the income of the 

comparison sample, and thus, the overall findings. 

First, we select homebuyers with loan amounts that 

fall below the 95th percentile in the IDA homebuyer 

sample, which is $390,000. Using a loan amount 

cutoff at the upper end of the IDA homebuyer 

sample for the comparison group generates a 

relatively advantaged comparison group (relative 

to the IDA homebuyer sample), and thus provides 

a conservative estimate of the potential benefits of 

participating in an IDA program on foreclosures. 

To move toward a somewhat less advantaged 

comparison group, we select homebuyers with 

loan amounts below $390,000 who also have FICO 

scores below 680.11 These criteria limit the mortgage 

performance comparison sample to 230,060 and 

215,029 loans, respectively. We create a third 

comparison group that further limits the sample 

by loan amount and examines foreclosures among 

homebuyers with loan amounts that fall below the 

mean loan amount for IDA homebuyers ($130,000) 

and who also have FICO scores below 680.12 Using 

this lower loan amount cutoff, which limits the 

comparison sample to 77,353 loans, provides an 

upper-bound estimate of the potential benefits of 

participating in an IDA program on foreclosures. 

IV. Results 

What are the economic and demographic 

characteristics of IDA homebuyers? In what ways 

are they similar to and different from other lowincome homebuyers? 

The IDA participants in this sample were 

predominantly minority, female, and low income. 

As demonstrated in Figure 3, 32 percent of 

homebuyers were white, while nearly 40 percent 

9
Weathering the Storm

Have IDAs Helped Low-Income Homebuyers Avoid Foreclosure?

were African American and 20 percent were 

Hispanic. Almost three-fourths of the IDA 

participants were female.13 IDA participants’ 

incomes were recorded at the time they entered 

the IDA program, and the median annual income 

was $25,440. While our sample of IDA homebuyers 

is not a random sample of IDA participants, its 

demographic characteristics generally match those 

of the overall population of IDA participants. 

According to the fiscal year 2007 Report to Congress 

for the Assets for Independence Program – which 

is the largest source of funding for IDAs in the 

United States and also the largest source of data 

on programs and participants – 73 percent of IDA 

participants are minority, 75 percent are female, and 

50 percent enter the program with incomes below 

150 percent of the federal poverty level, or $25,755 

(U.S. DHHS, n.d., 14 and 53).

A comparison of IDA homebuyers and lowincome HMDA homebuyers yields a number of 

socioeconomic differences between the groups. IDA 

participation appears to expand homeownership 

opportunities to less advantaged groups, specifically 

minorities and women.14 White homebuyers 

make up only 32.2 percent of the IDA sample, 

but they represent 69.2 percent of the low-income 

homebuyers in the HMDA sample. The proportion 

of African American homebuyers in the IDA sample 

is over three times higher than in the HMDA sample, 

and for Hispanic homebuyers, the proportion is 

1.5 times higher. Similarly, 73.5 percent of the IDA 

homebuyers are female compared with 44.6 percent 

of the HMDA sample (Figure 3).

Due to the place-based nature of IDA programs and 

their mission-driven focus on reaching underserved 

populations, it is not surprising that many of 

the participants are minority or female. The IDA 

programs are serving a population that was more 

White,

Non-Hispanic

Black,

Non-Hispanic

Hispanic Other Female

Percent of homebuyers

73.5

IDA Homebuyer

HMDA Homebuyer

38.5

32.2

9.9

19.5

5.6***

12.2*** 13.0***

69.2***

0

10%

20%

30%

40%

50%

60%

70%

80%

44.6***

Figure 3: Low-income Homebuyers’ Demographic Characteristics

Comparison of IDA and HMDA Homebuyer Samples

Source: Authors’ tabulations of IDA program data and HMDA data.

Notes: The race/ethnicity comparison is based on 771 IDA homebuyers and 239,127 HMDA homebuyers. The gender comparison 

is based on 780 IDA homebuyers and 245,216 HMDA homebuyers. We use a chi-squared test and a t-test to test whether the 

IDA homebuyer race and ethnicity (chi-squared test) and gender (t-test) are statistically significantly different from the HMDA 

homebuyers. *p<.10, **p<.05, ***p<.01

10
likely to enter the subprime mortgage market. In 

2006, African American and Hispanic borrowers 

were more than 3 and 2.6 times as likely as white 

borrowers, respectively, to receive a high-cost 

home purchase loan (Avery, Brevoort, and Canner 

2007). Other research has found that women are 32 

percent more likely than men to receive a subprime 

mortgage (Fishbein and Woodall 2006). 

What loan terms do IDA participants receive? How 

do these compare with loan terms for other lowincome homebuyers? 

Our analysis of loan terms comes from comparisons 

of the IDA homebuyer sample and the low-income 

HMDA sample. It is important to note that the source 

of the loan characteristics differs across the two 

samples. Loan terms for the IDA homebuyers come 

from administrative records that were recorded by 

IDA program staff and were collected primarily from 

loan documentation required from participants at 

the time of purchase. The loan terms in the HMDA 

sample come directly from the lending institutions. 

Comparisons of these two samples suggest that IDA 

homebuyers receive better loan terms than other 

low-income homebuyers. This holds even though 

the loan values are substantively the same across the 

two samples; the median loan was $92,250 for IDA 

homebuyers and $94,000 for HMDA homebuyers.

Our analysis suggests that IDA homebuyers are 

less likely to receive conventional loans and more 

likely to receive government-insured loans, as 

compared with other low-income homebuyers 

(Table 1). Among IDA homebuyers, 40 percent 

received a government-insured loan (60 percent 

received a conventional loan), compared with only 

15 percent of HMDA low-income homebuyers. As 

mentioned above, government-insured loans can 

benefit first-time homebuyers by providing lower 

interest rates and requiring lower down payments. 

For both samples, FHA-insured loans are the most 

common type of loan among those who received 

a government-insured loan. Thirty percent of IDA 

homebuyers received a FHA-insured loan, as did 

14 percent of low-income HMDA homebuyers. 

Ten percent of IDA homebuyers received FSA/

RHS-insured loans. The comparable number 

for the homebuyers in our HMDA sample is 0.4 

percent. Finally, roughly 1 percent of both samples 

received a VA-guaranteed loan. The higher rates of 

government-insured loans among IDA homebuyers 

Table 1: Low-income Homebuyers’ 

Loan Type and Characteristics

Comparison of IDA and 

HMDA Homebuyer Samples

IDA 

Homebuyers

HMDA 

Homebuyers

Loan Amount

Median Amount $92,250 $94,000

Loan Type

Conventional 59.8 84.7***

FHA Insured 29.8 13.5***

VA guaranteed 0.9 1.4***

USDA (FSA/RHS) 9.6 0.4***

Loan Characteristics

High Interest Rate 1.5 19.6***

Subprime 0.2 9.3***

Source: Authors’ tabulations of IDA program data and 

HMDA data.

Notes: Among the 831 IDA homebuyers, loan amount, loan type, 

and a subprime indicator are available for 420, 554, and 554 IDA 

homebuyers, respectively. The HMDA sample includes 259,922 

homebuyers for each of these variables. The high interest rate 

comparison is limited to homebuyers who purchased their homes 

between 2004 and 2007 (vs. 1999 to 2007) because HMDA only 

began reporting high interest rates in 2004. The high interest rate 

comparison is based on 402 IDA homebuyers and 165,247 HMDA 

homebuyers. We use t-tests and chi-squared tests to test whether 

the IDA homebuyer loan amount (t-test), loan type (chi-squared 

test), and loan characteristics (t-test) are statistically significantly 

different from the HMDA homebuyers. *p<.10, **p<.05, ***p<.01

11
Weathering the Storm

Have IDAs Helped Low-Income Homebuyers Avoid Foreclosure?

could result from several aspects of the IDA 

program, including homeownership counseling that 

provides IDA participants with information about 

different loan options and products.

IDA homebuyers are also significantly less likely 

than other low-income homebuyers to receive high 

interest rate or subprime loans (Table 1). Among 

individuals who bought their homes between 2004 

and 2007, only 1.5 percent of IDA homebuyers have 

high interest rate loans, while the corresponding 

number for the low-income HMDA sample is 19.6 

percent.15 The better loan terms also hold when 

looking across the full 1999 to 2007 period. Our 

analysis of subprime loans shows that 0.2 percent 

of IDA homebuyers received a subprime loan, 

compared with 9.3 percent of the low-income 

HMDA sample. One caveat is that loans in our 

HMDA sample are flagged as subprime if the 

loan originated from a lending institution with a 

disproportionate share of subprime loans (based on 

HUD’s subprime list); the IDA homebuyer measure 

is based on program reports of whether the loan is a 

subprime loan. 

These differences in loan type and characteristics 

across the IDA and HMDA samples are large (Table 

1), but the comparisons are not exact. Still, the 

patterns suggest that IDA participants obtained 

better loan terms – less costly and lower-risk loans – 

than other low-income homebuyers. Various aspects 

of the IDA program may contribute to this result, 

including the financial match (which can increase 

down payments), access to financial education 

and homeownership counseling (which can lead 

to improved credit scores), and mortgage product 

monitoring. Loan terms are important because they 

affect homeowner down payment and monthly 

mortgage payments. Are these more favorable loan 

terms, higher down payments, and homeownership 

counseling components actually related to the 

likelihood of a home foreclosure? To examine 

this question, we next determine whether IDA 

homebuyers have been less likely to have a home 

foreclosed than other similar homebuyers. 

What are foreclosure rates among IDA borrowers? 

How do they compare with foreclosure rates among 

other low- and moderate-income homebuyers?

IDA homebuyers experienced low foreclosure rates, 

only in the 3 percent range. Moreover, this IDA 

foreclosure rate stands well below the foreclosure 

rate of any of our three comparison groups. Recall 

that the three comparison groups are (1) buyers with 

loan amounts below $390,000, (2) buyers with loan 

amounts below $390,000 and FICO scores below 680, 

and (3) buyers with loan amounts below $130,000 

and FICO scores below 680.16

Among our sample of IDA homebuyers – all 

of whom purchased their homes between 1999 

and 2007 – 3.1 percent (or 25 out of 803 homes) 

entered foreclosure by April 2009 (Figure 4).17 This 

foreclosure rate is less than one-half to one-third of 

the foreclosure rates for the comparison samples. 

Homebuyers with loans less than $390,000 had a 

foreclosure rate of 6.5 percent, more than twice the 

rate for IDA homebuyers. Adding the FICO score 

restriction leads to a slightly higher foreclosure 

rate of 6.7 percent. Finally, comparison data show 

that loans below $130,000 with corresponding 

FICO scores below 680 had a foreclosure rate of 9.0 

percent. Thus, each of the comparison samples has 

statistically significant, substantially higher rates of 

foreclosure than do IDA homebuyers. In addition to 

relatively low foreclosure rates for the IDA sample, 

our property searches reveal that 93 percent of IDA 

homebuyers have retained their homes with no 

evidence of problems paying their mortgage as of 

April 2009. 

IDA participation may reduce foreclosures in 

several ways. First, IDA programs can improve the 

12
loan terms of mortgages obtained by low-income 

homebuyers. The better loan terms may result from 

the financial education, homebuyer counseling, or 

mortgage product monitoring components of the 

program. Participants can use their IDA match 

funds for down payments and may learn about 

additional sources of down payment assistance, 

including soft seconds, closing cost grants from 

Housing Finance Agencies (HFAs), and Federal 

Home Loan Bank (FHLB) Idea funds. IDA programs 

can also provide homebuyers with the time they 

need to build savings and repair credit, which can 

improve their prospects for buying and keeping 

a home. Each of these IDA program components 

can plausibly improve homeownership outcomes, 

but further research is required to disentangle their 

distinctive contributions. Still, this study presents a 

strong case that IDA programs reduce foreclosures 

and increase successful homeownership among lowincome homebuyers. 

V. Conclusion

This study provides the first evidence available 

on loan terms and foreclosure outcomes of 

IDA homebuyers. The findings show that the 

overwhelming majority of IDA homebuyers in the 

sample accessed prime-rate mortgage products 

to finance their home purchase. The findings also 

show that the vast majority of IDA homebuyers 

have successfully maintained their homeownership 

status amidst the foreclosure crisis. And while the 

IDA homebuyers in our study do not represent a 

random sample of the larger low-income population, 

IDA Homebuyers Loan <$390k Loan <$390k

and FICO <680

Mortgage Performance Data Homebuyers

Loan <$130k

and FICO <680

6.5*** 6.7***

9.0***

3.1

0

2%

4%

6%

8%

10%

Figure 4: Low-income Homebuyers’ Foreclosure Rates 

Comparison of IDA Homebuyers and Mortgage Performance Data Homebuyers

Source: Authors’ tabulations of IDA program data and mortgage performance data.

Notes: The IDA data include 803 homebuyers. The mortgage performance data include (1) 230,060 homeowners with loan amounts 

less than $390,000, (2) 215,029 homeowners with loan amounts less than $390,000 and FICO scores lower than 680, and (3) 77,353 

homeowners with loan amounts less than $130,000 and FICO scores lower than 680. We use t-tests to test whether the IDA homebuyer 

foreclosure rates are statistically significantly different from the mortgage performance data homebuyers. *p<.10, **p<.05, ***p<.01

13
Weathering the Storm

Have IDAs Helped Low-Income Homebuyers Avoid Foreclosure?

it is still worth noting the stark differences between 

the loan terms and foreclosure rates of the IDA 

sample and those of other low-income individuals 

who purchased homes in the same communities 

during the same time period. Although our research 

does not explicitly document housing wealth 

accumulation among the IDA homebuyer sample, 

other studies suggest that the likelihood of wealth 

accumulation through homeownership is highly 

correlated with loan terms and housing tenure 

(Boehm and Schlottmann 2004; Shlay 2006; Turner 

and Luea 2009). 

The study findings are consistent with the 

hypothesis that the services and features of 

IDA programs (e.g., matched savings, financial 

and homebuyer education and oversight of or 

guidance regarding loan products) help lowincome populations obtain affordable mortgages 

and experience successful and sustainable 

homeownership outcomes. Our study is unable to 

distinguish between the relative effects that each 

service and feature of an IDA program contributes 

to the overall outcome, an important area for 

additional research. 

The study findings have implications beyond 

IDA programs. Other homeownership assistance 

programs provide low-income populations with 

some of the services provided by IDA programs, 

notably credit and debt counseling and financial 

education, prepurchase counseling, and various 

forms of down payment assistance. In the absence of 

evidence about which specific elements of IDAs do 

the most to facilitate successful homeownership, it 

seems prudent to continue to study and support the 

multiple strategies that demonstrate strong potential 

to help low-income populations prepare for and 

succeed in homeownership, including homebuying 

that leads to wealth building and financial security. 

VI. Notes

1 The literature finds that maximum match amounts (or 

match caps) are positively related to increased participant 

savings, as measured through average monthly net 

deposits (Han and Sherraden, forthcoming; Schreiner and 

Sherraden, 2007a). The literature is less clear around the 

effect of match rates on participant savings. However, the 

amount individuals have for a down payment (their own 

IDA savings plus the IDA match) is expected to be higher 

with versus without participation in the IDA program. 

2 The six programs are: Opportunity Fund (San Jose, 

CA), La Casa of Goshen (Goshen, IN), New Hampshire 

Community Loan Fund (Concord, NH), New Century IDA 

Program (Forsyth County, NC), WECO Fund (Cleveland, 

OH), and Foundation Communities (Austin, TX).

3 Eleven of the 64 counties in which homes were purchased 

did not provide free or low-cost online access to public 

records, which precluded verification of status for 11 

homeowners. We were also unable to verify an additional 

17 homeowners. Note that two programs conducted some 

of the property searches themselves, one due to privacy 

issues and one as a part of the program’s normal operating 

procedures. We verified that program’s property searches 

were conducted in the same manner as those conducted by 

the research team.

4 We ran chi-squared tests to compare the difference in 

distributions of categorical variables and t-tests to compare 

the difference in means of continuous variables.

5 The Home Mortgage Disclosure Act was enacted in 1975 

in an effort to identify discriminatory lending practices. 

The Act requires mid-size and large lending institutions 

to report basic information from loan applications. 

Overall, the HMDA data capture about 80 percent of all 

loans. HMDA data are less complete in nonmetropolitan 

areas and counties with small populations because 

institutions serving these areas are not required to report 

the geographic location of the property, and some are 

even exempt from filing under HMDA. While this is a 

downside of the HMDA data, they are the most complete 

data available on homebuyers’ demographic characteristics 

and their loan terms. The majority of our IDA homebuyers 

bought homes in larger counties and metropolitan areas, 

so our analysis should not be significantly affected by this 

limitation.

6 The high interest rate flag is based on an APR calculation, 

which takes into account the initial interest rate as well as 

the subsequent rates on the loan.

14
7 The last HUD subprime list was published in 2005, so we 

use the 2005 list to identify subprime lenders in 2006 and 

2007.

8 We cannot match on month and year of home purchase 

because the HMDA files do not include month, only year, 

of the loan origination.

9 Our IDA homebuyer data set includes only income levels 

at the time of program entry, while the HMDA data 

provides home purchasers’ incomes at loan origination. 

10 IDA homebuyers’ loans may be present in the mortgage 

performance comparison sample but will represent such 

a small proportion they will not drive the overall sample 

characteristics.

11 We limit the sample to homebuyers with FICO scores 

below 680 because automated underwriting software 

programs like Fannie Mae’s Desktop Underwriter and 

Freddie Mac’s Loan Prospector have used this FICO score 

as a minimum threshold for conventional first mortgages 

for borrowers with higher loan-to-value ratios. Fannie Mae 

Eligibility Matrix, updated on January 14, 2010, accessed 

on February 10, 2010 (https://www.efanniemae.com/sf/

refmaterials/eligibility/index.jsp

12 $133,000 is the mean loan amount in the IDA homebuyer 

sample.

13 Being marked a female does not necessarily mean that 

it is female-headed household. Gender in the data is not 

indicative of marital or family status. Whether the IDA 

was owned by a woman, man or couple depended on how 

programs maintained administrative data. We did not 

collect information on household composition or marital 

status. 

14 For the IDA sample, race, ethnicity and gender of the IDA 

participant are reported. This person is presumably on the 

loan application. In HMDA, race, ethnicity and gender 

of the primary applicant is reported. Race, ethnicity and 

gender of the co-applicant is also reported in HMDA but is 

not used in this analysis.

15 As mentioned in the data section, the HMDA data only 

began to include a high interest rate flag in 2004. To 

construct a comparable high interest rate flag for the IDA 

sample, we take IDA homebuyer self reported interest rate 

and calculate whether that rate was three points above the 

prime rate at the time of purchase.

16 $390,000 is the loan amount at the 95th percentile in the 

IDA homebuyer sample and $130,000 is roughly the mean 

loan amount in the IDA sample.

17 Of the 25 homes that entered foreclosure, 23 homes 

foreclosed, and two homes received a notice of foreclosure, 

but there was evidence that they were able to bring their 

loans current and keep their homes. An additional five 

homes received a notice of default but did not enter the 

foreclosure process. One home was sold six months after 

the default notice. 

VII. References

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Clancy, Margaret, Michal Grinstein-Weiss, and Mark 

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16
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