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A private lender cooperative model for residential mortgage finance

Author Info

Listed author(s):
  • Toni Dechario
  • Patricia C. Mosser
  • Joseph Tracy
  • James Vickery
  • Joshua Wright

Abstract

We describe a set of six design principles for the reorganization of the U.S. housing finance system and apply them to one model for replacing Fannie Mae and Freddie Mac that has so far received frequent mention but little sustained analysis – the lender cooperative utility. We discuss the pros and cons of such a model and propose a method for organizing participation in a mutual loss pool and an explicit, priced government insurance mechanism. We also discuss how these principles and this model are consistent with preserving the “to-be-announced,” or TBA, market – particularly if the fixed-rate mortgage remains a focus of public policy.

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Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 466.

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Date of creation: 2010
Handle: RePEc:fip:fednsr:466
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Keywords: Government-sponsored enterprises ; Housing - Finance ; Mortgages ; Insurance; Government;

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  1. A. Cole, Rebel & Mehran, Hamid, 1998. "The effect of changes in ownership structure on performance: Evidence from the thrift industry," Journal of Financial Economics, Elsevier, vol. 50(3), pages 291-317, December.
  2. David Genesove & Wallace P. Mullin, 2001. "Rules, Communication, and Collusion: Narrative Evidence from the Sugar Institute Case," American Economic Review, American Economic Association, vol. 91(3), pages 379-398, June.
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Cited by:

  1. W. Scott Frame & Larry D. Wall & Lawrence J. White, 2012. "The Devil's in the Tail: Residential Mortgage Finance and the U.S. Treasury," Working Papers 12-12, New York University, Leonard N. Stern School of Business, Department of Economics.
  2. James Vickery & Joshua Wright, 2013. "TBA trading and liquidity in the agency MBS market," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 1-18.
  3. Andreas Fuster & James Vickery, 2015. "Securitization and the Fixed-Rate Mortgage," Review of Financial Studies, Society for Financial Studies, vol. 28(1), pages 176-211.
  4. Robert Hockett, 2013. "Paying Paul and robbing no one: an eminent domain solution for underwater mortgage debt," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 19(Jun).

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