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There are two major factors constraining the homeownership rate today: limited supply relative to net household formation and restricted credit availability. In this paper, we carefully document each of these factors, arguing that is is very difficult to fix the supply issues, as so much of the problem is local zoning laws, while steps can be taken to fix the credit availability issues. The supply/demand imbalance is currently the more significant of the two problems, as it places upward pressure on both home prices and rents. [ABSTRACT FROM AUTHOR]

This Article quantifies the dramatic tightening of mortgage credit that has occurred in the post-crisis period. It then describes the policy actions to loosen the credit box taken to date by both the government sponsored enterprises (GSEs) and their regulator, the Federal Housing Finance Agency (FHFA), as well as those taken by the Federal Housing Administration (FHA), concluding the FHA still has some important actions it has yet to undertake. Finally, the consequences of tight credit are discussed: namely, a lower home ownership rate, particularly among minorities, leaving many unable to access what has historically been the single most powerful vehicle to build wealth. [ABSTRACT FROM AUTHOR]

We measure the cost of foreclosure delay by estimating time-related foreclosure costs using a large national sample of residential mortgages before, during, and after the recent U.S. housing crisis. The large volume of foreclosures, coupled with an unprecedented series of government interventions in mortgage servicing practices, significantly extended foreclosure timelines during and after the crisis. Costs were especially pronounced in judicial review states, which saw average foreclosure costs go up 15 percentage points, 24 percentage points in the highest cost state. Cost increases of this magnitude are likely to have consequences for servicing practices and mortgage credit availability. [ABSTRACT FROM AUTHOR]

The article focuses on loss severity on mortgages in the U.S. Topics discussed include data by mortgage lender Freddie Mac on mortgage loans, mortgage insurance (MI) and preset severities in deals of the company, outcomes for credit events experienced by loans such as modification and liquidation, loan-to-value (LTV) ratio, government-sponsored enterprises (GSEs) releasing data on loans and loan severities affected by characteristics of loans.

The total number of purchase mortgages originated in 2012 is considerably less than half of peak levels and is down 44% from 2001 levels. The authors estimate that a large portion of the drop--as many as 1.2 million loans in 2012 alone--can be attributed to low credit availability and find that African-American and Hispanic borrowers have been disproportionately affected by the credit box tightening. An overly tight credit box means fewer individuals will become homeowners at exactly the point in the housing cycle when it is advantageous to do so, depriving these individuals of the chance to build wealth. It also means the housing market will recover more slowly, because there is a more limited pool of potential buyers for each home. Ultimately, it hinders the economy through fewer new home sales and less spending on furnishings, landscaping, renovations, and other consumer spending that goes along with home purchases. [ABSTRACT FROM AUTHOR]

Panelists discussed home-price behavior and expectations, the potential of buy-to-rent programs, and credit availability. The panelists generally had the view that a housing bubble is not occurring. Differences across geographic markets can make generalizations about national trends difficult. The high end of the housing market has recovered quickly, while credit contraction has caused difficulty for lower-end buyers. The majority of the panel projected a housing price growth rate between 6% and 8% for 2014. A more-diverse population with a potentially lower home ownership rate highlights the necessity of expanding the shrinking credit box. The panel was split over whether the single-family buy-to rent is a just a trade that will end when the rally in home prices stalls or whether it is a new business here to stay. There was little consensus on whether credit availability will improve or decline given the prospect of Fed tapering, moving to the Qualified Mortgage (QM), and changes in Federal Housing Finance Agency (FHFA) leadership. [ABSTRACT FROM AUTHOR]

There is a widespread policy consensus that the U.S. government should be playing a smaller role in residential mortgage finance and that Fannie Mae and Freddie Mac should be wound down and eventually shuttered. But the issue of how extensive the federal government's role should be-in essence, whether it should have a role in backstopping the bulk of the mortgage market-has eluded consensus, and the post September 2008 status quo has persisted. This panel discussion summary starts with a section by Professor Lawrence White that briefly provides background on this issue; summarizes the current status of the GSEs and the major pieces of legislation that have been introduced in the Congress to address these issues; and offers a set of important questions that ought to be asked about housing and housing finance policy more generally. Adam LaVier starts with some of the current impediments to housing finance policy reform in Washington; poses the question of whether legislative action is necessary; discusses the measures that might move policy forward in the Senate, House, and Obama administration; suggests what the Federal Housing Finance Authority (FHFA) might do in the near term under its new director Mel Watt; and presents four possible end-game scenarios. Then, Laurie Goodman makes a case that while a consensus is slowly emerging on what a future housing finance system ought to look like, GSE reform is a long way off. It is easier to agree on themes and much harder to agree on the specific structural, risk sharing, and operational details and how to get from here to there. As a result, she considers GSE reform unlikely before the 2016 election. She believes four "plumbing" issues need to be resolved: 1) What does the transition look like? 2) Should insurance be provided by guarantors only or a combination of guarantors and the capital markets? 3) What does the ultimate structure look like? 4) Is mortgage insurance separate from the guarantor function? Finally, Andrew Davidson notes that while a broad consensus is developing that home buyers seeking financing would be best served by a system in which mortgage-backed securities had an explicit government wrap with private capital standing in front of that wrap, there is little consensus on the nature of the entities that would provide the private capital and the role of the government in providing standards and regulating the suppliers of private capital. He thinks cooperatives may be the best form of organization to deliver private capital, stability, standardization, and risk sharing to the mortgage securitization process. The existing GSEs could be transformed into originator-owned cooperatives with little disruption to the mortgage finance system. [ABSTRACT FROM AUTHOR]

This article looks at the modification experience of the private-label mortgage market. We quantify the major drivers of modification success: modification type, amount of pay relief, how early in the delinquency process the modification is received, first versus subsequent modifications, and the borrower's FICO score. We show that early modifications greatly increase success, but the tendency has been for modifications to take place later. We also show that even controlling for pay relief, principal modifications are more effective than other modification types, and we discuss those circumstances in which principal reduction can dramatically improve modification success. Finally, we discuss some of the issues in using principal reduction on government-sponsored enterprise modifications, including the moral hazard issue. [ABSTRACT FROM AUTHOR]

The housing market remains very vulnerable. We make the case that a sizeable supply/demand imbalance has been created by the fact that the housing market faces a huge overhang of homes from borrowers who are either not making mortgage payments or will be unable or unwilling to do so in the future. At the same time, 19% of 2007 borrowers would not qualify for a mortgage today by virtue of payment history alone. And the demand for home ownership has further contracted because credit availability is limited. Every single governmental action seems to be moving toward limiting credit availability further still. We strongly believe that investors are the key to increasing housing demand, and the best way to encourage this is to increase financing for investor properties. [ABSTRACT FROM AUTHOR]

In this article, the authors show that negative equity alone is a more important predictor of defaults than unemployment. They also establish that when the borrower is significantly underwater, high unemployment can act as a trigger, amplifying the level of defaults. [ABSTRACT FROM AUTHOR]

The article focuses on covered bonds as a source of U.S. mortgage loan funding. The covered bonds market is considered as one of the largest sectors of the European fixed-income market. These bonds serve as a financing mechanism for bank originators of residential mortgages and other assets while the collateral for them could be residential mortgage loans, commercial mortgage loans or public sector loans. They are called as such because the term used for the pool of loans used as collateral is "cover pool."

Collateralized debt obligations backed by commercial real estate (CRE CDOs) have quickly become an important and accepted part of commercial real estate finance. Issuers are drawn to CRE CDOs for efficient financing, and investors are drawn to the diversification benefits. The authors describe CRE CDOs, their evolution, current market trends, and historical performance. CRE CDOs give traditional real estate asset managers the flexibility to take advantage of relative value opportunities within the real estate market, while providing non-recourse financing that matches the average life and interest profile of the underlying asset pool. And as managers are drawn to CRE CDOs for structural flexibility and term financing, investors benefit from exposure to a diverse portfolio of managed CRE assets. As the CDO market continues to develop and evolve, there is an increasing number of managed CRE CDOs and CRE CDOs backed by commercial real estate loans. While this evolution brings new risks to CRE CDOs, it also provides new opportunities for investors. The authors also provide a framework for evaluating CRE CDO investments and discuss how rating agencies rate CRE CDOs. [ABSTRACT FROM AUTHOR]