Scotsman Guide > Residential > March 2011 > Department

 Enter your e-mail address and password below.


Forgot your password? New User? Register Now.

Residential Department: Q&A: Rockefeller Institute and MBA: March 2011


Q&A: Rockefeller Institute and MBA

James Follain, senior fellow, Rockefeller Institute; and Michael Fratantoni, vice president of research and economics, Mortgage Bankers Association

There's a lot to be learned by looking at cities in decline, says Rockefeller Institute senior fellow James Follain. His recent report — a Study of Real Estate Markets in Declining cities, sponsored by the Mortgage Bankers association (MBA) — offers insights into the changing nature of America's real estate market. The study gives mortgage professionals "an opportunity to think strategically about how they should manage their risk exposure in some of these markets," says Michael Fratantoni, MBA's head of research and economics.

Why study declining cities?

Follain: There are insights to learn by looking at traditional declining cities in the Rust Belt and cities that have been hit hard by the real estate crisis.

Fratantoni: We also wanted to try to stimulate public-policy discussions, particularly those pertaining to regulations that may be causing unintended consequences in declining markets. For example, if lenders are going to be penalized for operating in certain neighborhoods within these markets but not in others, is there legal or regulatory liability there? If there is, lenders may pull out of those markets entirely.

To access the report on real estate markets in declining cities, visit

The report looked at variations between neighborhoods in the same declining city. What did you find?

Follain: Some neighborhoods could come back relatively quickly. Some could take a really long time. In some of the new declining cities, people aren't moving away like they are in the Rust Belt, but the demand for housing going forward is less because people's expectations about the future are different. They don't have the irrational exuberance they once did.

Can we predict which neighborhoods will recover first?

Follain: That's a really hard question. If you're working or living in a declining city, you'd be wise to check a lot of sources and talk to a lot of people. The good news is that we're in the middle of a data avalanche. There's a lot of information out there. Instead of looking at a national average, drill down. I'd also encourage the industry and the government to be clear about their [lending] guidelines. When there's ambiguity, the uncertainty itself can become a cause for holding back.

Fratantoni: The more general point is that with rampant uncertainty, lenders, investors and potential homebuyers are all going to pull back. Policymakers who provide additional information or additional assurance with respect to regulations or legal liability will help reduce that uncertainty.

What obstacles face mortgage originators looking to identify cities or neighborhoods prone to decline?

Follain: The challenge is really to define what is a potentially persistent source of decline. And we have to be honest. Sometimes you'll see a certain neighborhood or block in serious trouble. Sometimes you'll find that neighborhood recovery programs aren't working. The story is still evolving.


Darrick Meneken was an associate editor at Scotsman Guide. For questions on this article, call (800)297-6061 or e-mail

Fins A Lender Post a Loan
Residential Find a Lender Commercial Find a Lender
Scotsman Guide Digital Magazine


© 2019 Scotsman Guide Media. All Rights Reserved.  Terms of Use  |  Privacy Policy