Indiana University SPEA Edward J. Bloustein School of Planning and Public Policy University of Pennsylvania AIR American University

Panel Paper: Mortgage Journeys: Reflections on Ethnography's Contributions to Research in Housing Policy

Friday, November 13, 2015 : 8:30 AM
Brickell Prefunction (Hyatt Regency Miami)

*Names in bold indicate Presenter

Li Ning Huang, Fannie Mae
The housing crisis and economic recession of 2008 had significant effects on the housing market in America. Since then, indications are that lending standards have risen; access to credit is more difficult; and mortgage lenders are, by and large, more risk-averse than before the crisis in complying with increasing regulations. To the degree that lower-income individuals’ financial situations might render it more difficult to buy a home under these conditions, lower-income Americans may encounter significant challenges when obtaining a mortgage.

There is strong evidence about a range of challenges homebuyers face in the aggregate. For example, according to Fannie Mae’s National Housing Survey,TM a monthly telephone survey among 1000 consumers, young renters said that gathering a down payment and affording the monthly mortgage payment are two of the top barriers to obtaining a mortgage. Fannie Mae’s National Housing Survey also compared mortgage shopping behaviors between higher- and lower-income consumers and found that that higher-income borrowers are more likely to use online tools or applications while lower income borrowers are more likely to rely on real estate agents, mortgage lenders, family, and friends for advice and recommendations. Other evidence has shown that consumers struggle with financial literacy adequate to interpret complex transactions like a mortgage, leading to difficulties comparing offers of credit. While large-scale quantitative research is crucial to understanding overall consumers’ financial attitudes, views on homeownership, and mortgage shopping behaviors, it provides a comparatively “thin” understanding of how’s or why’s from consumers’ own perspectives.

This paper presents the methodology of an ethnographically-inspired study designed to get “thick” description of first-time low- and moderate-income homebuyers’ experiences with the mortgage market and perceptions of access to mortgage credit. One of the study’s innovative methodologies is to have homebuyers keep video diaries about their home and mortgage search process in real time, to let consumers tell their stories in their own words. We couple the video data with in-depth interviews, survey questions, and analysis of mortgage documents to compile robust case studies to get a deep understanding of homebuyers’ motivations, experience, and emotions, which are less likely to be addressed well via quantitative surveys. Why do homebuyers seek out only one or multiple mortgage quotes? How do they come to trust or distrust certain sources of information? When buyers seek only one opinion, do they find the process reliable, burdensome, or futile such that they see no benefit in seeking more opinions? What is the emotional trajectory and effect of a mortgage search on a first-time buyer?

In conclusion, the paper discusses Fannie Mae’s decision to take an ethnographic approach and the value ethnography adds to complement its quantitative learnings. Using ethnographic methods helps overcome survey methodology’s recall bias and the bias of research participants’ desirability to be perceived as a “rational” consumer. With the ethnographic approach, researchers are present with participants in the context of their real everyday life. The results from this ethnographic study will play a critical role in informing industry-wide efforts on homeownership affordability and lending practices.