The Devil's in the Tail: Residential Mortgage Finance and the U.S. Treasury

Posted: 17 Aug 2012

See all articles by W. Scott Frame

W. Scott Frame

Federal Reserve Bank of Dallas

Larry D. Wall

Federal Reserve Bank of Atlanta - Research Department

Lawrence J. White

New York University (NYU) - Leonard N. Stern School of Business, Department of Economics

Date Written: August 2012

Abstract

This paper seeks to contribute to the U.S. housing finance reform conversation by providing a critical assessment of the various types of policy proposals that have been offered. There appears to be a broad consensus to maintain explicit government guarantees for certain narrowly defined borrower populations, such as FHA insurance guarantees for low- and moderate-income and first-time homebuyers. However, the expected role of the federal government in the broader housing finance system is in dispute: ranging from no role; to insuring against only extreme or tail events; to insuring against all losses. However, most proposals agree that any public insurance be priced and available only for loans meeting pre-specified criteria in an effort to limit taxpayer exposure.

Keywords: residential mortgages, securitization, government-sponsored enterprises, housing subsidies.

Suggested Citation

Frame, W. Scott and Wall, Larry D. and White, Lawrence J., The Devil's in the Tail: Residential Mortgage Finance and the U.S. Treasury (August 2012). NYU Working Paper No. 2451/31589. Available at SSRN: https://ssrn.com/abstract=2131060

W. Scott Frame (Contact Author)

Federal Reserve Bank of Dallas ( email )

2200 N Pearl Street
Dallas, TX 75201
United States
214-922-6984 (Phone)

Larry D. Wall

Federal Reserve Bank of Atlanta - Research Department ( email )

1000 Peachtree Street, NE
Atlanta, GA 30309-4470
United States
404-498-8937 (Phone)
404-498-8956 (Fax)

HOME PAGE: http://www.frbatlanta.org/econ_rd/bios/wall.htm

Lawrence J. White

New York University (NYU) - Leonard N. Stern School of Business, Department of Economics ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

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