Search Results
Working Paper
Financing Affordable and Sustainable Homeownership with Fixed-COFI Mortgages
The 30-year fixed-rate fully amortizing mortgage (or ?traditional fixed-rate mortgage?) was a substantial innovation when first developed during the Great Depression. However, it has three major flaws. First, because homeowner equity accumulates slowly during the first decade, homeowners are essentially renting their homes from lenders. With this sluggish equity accumulation, many lenders require large down payments. Second, in each monthly mortgage payment, homeowners substantially compensate capital markets investors for the ability to prepay. The homeowners might have better uses for this ...
Working Paper
FHA, Fannie Mae, Freddie Mac, and the Great Recession
Did government mortgage programs mitigate the adverse economic effects of the financial crisis? We find that counties with greater participation in traditional government mortgage programs experienced less severe economic downturns during the Great Recession. In particular, counties with higher levels of participation in FHA, Fannie Mae, and Freddie Mac lending had relatively smaller increases in mortgage delinquency rates; smaller declines in purchase originations, home sales, home prices, and new automobile purchases; and smaller increases in unemployment rates. These results hold both in ...
Conference Paper
Basel II competitive implications
Conference Paper
Federal Reserve research on government-sponsored enterprises
Working Paper
Investor Demands for Safety, Bank Capital, and Liquidity Measurement
We construct a model of a bank's optimal funding choice, where the bank negotiates with both safety-driven short-term bondholders and (mostly) risk-taking long-term bondholders. We establish that investor demands for safety create a negative relationship between the bank's capital choices and short-term funding, as well as negative relationships between capital and common measures of bank liquidity. Consistent with our model, our bank-level empirical analysis of these capital-liquidity tradeoffs show (1) that bank liquidity measures have a strong and negative relationship to its capital ratio ...
Conference Paper
The subsidy provided by the federal safety net: theory and measurement
Views about the value to depository institutions of the federal safety net differ widely. Resolution of the issue is important because defining the appropriate relationship between the federal safety net and financial institutions is central to the design of efficient financial modernization strategies. A model is presented of how the safety net subsidy affects the size of the banking system and the behavior of banks. The model suggests that banks should have lower capital ratios than similar nonbank financial firms. Evidence is presented that supports this prediction, and that banks have ...
Conference Paper
Can banks profitably fund mortgages?
