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Report
Credit risk transfer and de facto GSE reform
We summarize and evaluate Fannie Mae and Freddie Mac?s credit risk transfer (CRT) programs, which have been used since 2013 to shift a portion of credit risk on more than $1.8 trillion of mortgages to private sector investors. We argue that the CRT programs have been successful in reducing the exposure of the federal government to mortgage credit risk without disrupting the liquidity or stability of mortgage secondary markets. In the process, the programs have created a new financial market for pricing and trading mortgage credit risk, which has grown in size and liquidity over time. The CRT ...
Discussion Paper
Why are Adjustable Rate Mortgages So Rare These Days?
The fraction of mortgage borrowers who choose an adjustable-rate loan has fallen significantly over the past five years or so. Although the fraction edged up slightly in 2010, it remains close to historic lows, with less than 10 percent of mortgage originations since 2009 featuring an adjustable interest rate. What explains the striking decline? And what are its implications for borrowers and policymakers?
Journal Article
The government-sponsored enterprises: past and future
Fannie Mae and Freddie Mac's role in the housing bubble and financial crisis remains controversial. Did they precipitate or at least worsen the crisis? How do their benefits compare against their losses? Ronel Elul traces their evolution and actions and outlines reform proposals.
Journal Article
What to Do about Fannie and Freddie: A Primer on Housing Finance Reform
Policymakers face several issues in reforming the current system of mortgage finance toward one in which the government plays a less direct role.
Working Paper
The rescue of Fannie Mae and Freddie Mac
We describe and evaluate the measures taken by the U.S. government to rescue Fannie Mae and Freddie Mac in September 2008. We begin by outlining the business model of these two firms and their role in the U.S. housing finance system. Our focus then turns to the sources of financial distress that the firms experienced and the events that ultimately led the government to take action in an effort to stabilize housing and financial markets. We describe the various resolution options available to policymakers at the time and evaluate the success of the choice of conservatorship, and other actions ...
Journal Article
Introduction to Special Issue: The Appropriate Role of Government in U.S. Mortgage Markets
The U.S. mortgage finance system was one of the focal points of the 2007-08 financial crisis, yet legislative decisions about the appropriate role of the federal government in the system remain unsettled. Policy deliberations have focused on Fannie Mae and Freddie Mac?the two enormous government-sponsored enterprises that were placed into federal conservatorship in September 2008. The two GSEs have long been the centerpieces of a mortgage finance system that relies on capital market financing of U.S. residential mortgages. This volume contains eight articles that touch on several key ...
Report
The rescue of Fannie Mae and Freddie Mac
We describe and evaluate the measures taken by the U.S. government to rescue Fannie Mae and Freddie Mac in September 2008. We begin by outlining the business model of these two firms and their role in the U.S. housing finance system. Our focus then turns to the sources of financial distress that the firms experienced and the events that ultimately led the government to take action in an effort to stabilize housing and financial markets. We describe the various resolution options available to policymakers at the time and evaluate the success of the choice of conservatorship, and other actions ...
Journal Article
Credit risk transfer and de facto GSE reform
The Fannie Mae and Freddie Mac credit risk transfer (CRT) programs, now in their fifth year, shift a portion of credit risk on more than $1.8 trillion of mortgages to private-sector investors. This study summarizes and evaluates the CRT programs, finding that they have been successful in reducing the exposure of the government-sponsored enterprises and the federal government to mortgage credit risk without disrupting the liquidity or stability of mortgage secondary markets. The programs have also created a new financial market for pricing and trading mortgage credit risk, which has grown in ...