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

September 3, 2012

The Devil’s in the Tail: Residential Mortgage Finance and the U.S. Treasury
Source: Federal Reserve Bank of Atlanta

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 Federal Housing Administration 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. The expected role ranges 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 specified criteria to limit taxpayer exposure.

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Categories: business and economics, Federal Reserve Bank of Atlanta, government and politics, housing and real estate
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