Residential Foreclosures in the City of Buffalo, 1990-2000 - Federal ...

well in this low-income community. Surprisingly, in fact, Ellicott-Masten demonstrated
the lowest foreclosure rate on FHA purchase loans among all Buffalo communities.
The association between poor loan performance and low income may appear
contradictory to our findings in Chapter 3, which show higher foreclosure rates in higher
income census tracts. However, the foreclosure rates used in Chapter 3— and generally
in this report— are based on the percentage of foreclosures per housing unit, not on the
percentage of foreclosures per loan origination. Because Buffalo’s lower income
communities tend to see a low volume of lending, they may also show a low number of
foreclosures— and thus a low foreclosure rate based on housing units— despite
comparatively poorly performing loans.
In the previous two analyses, we examined factors—the volume of lending and
loan performance—that might have influenced foreclosure on the various types of loans.
We now turn to the effects of the patterns found in those analyses by examining the
distribution of foreclosures by loan type. Our discussion addresses the share of
foreclosures on either FHA or conventional loans and the share of foreclosures on
purchase, refinance, or assumed loans.
Distribution of Foreclosures between FHA and Conventional Loans
Table 10 shows foreclosures in 2000 according to the two main categories of mortgage
loans. For Buffalo overall, 38 percent of foreclosures were on FHA loans and 59 percent
were on conventional ones. This finding is consistent with our results on lending and loan
performance, in which FHA loans were found to account for 23 percent of lending but
foreclosed at a higher rate than did conventional loans. Interestingly, FHA foreclosures
represented a much larger share of foreclosures in Rochester in 1998, accounting for 60
percent of the total. This difference, as we discuss, may be due in part to a larger
proportion of subprime foreclosures in Buffalo. However, if we consider only prime
loans, about two-thirds of Rochester foreclosures were FHA compared with about onehalf
of Buffalo foreclosures. This finding appears to be attributable to a higher volume of
FHA lending in Rochester than in Buffalo rather than to differences in FHA loan
performance. In the Rochester study, FHA loans were estimated to account for about 40
percent of originations, significantly more than the 23 percent we found in Buffalo. At
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