Progress on Housing Finance Reform

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July 9, 2013 by apicomely

The firms were shielded by homeowner down payments and by private mortgage insurance before they had to make good on their guaranteed securities, but the housing price collapse of more than 30 percent combined with concentrations of Fannie and Freddies risk in key bubble states such as Nevada combined to generate losses that wiped out the firms thin capital cushions of less than 1 percent of their assets. With a 10 percent capital requirement, the firms would easily have made it through the worst housing cycle in recent memory. To be sure, a 10 percent capital requirement is not the same as the 100 percent in a fully private system. But a fully private system is neither feasible nor stable. By the standards of the recent housing debacle, the Corker-Warner legislation provides considerable protection for taxpayers. Still, any government guarantee gives rise to moral hazard, since investors will naturally seek to obtain government backing on risky mortgages that provide a high private upside if the loan works out, and a loss for taxpayers if it does not. The Corker-Warner legislation creates an empowered regulator with a mandate to ensure that underwriting standards remain high.

Finance Latest News: Britain Battles to Build Tech Giant as Home-grown Talent Goes West

Log out of Facebook How to remove this experience Finance Latest News: Britain Battles to Build Tech Giant as Home-grown Talent Goes West Link 5 hours ago, Wochit East London’s technology hub is established well beyond start-up status: Thousands of new web firms now work in the offices around Old Street and on any given day the area’s coffee shops buzz with young hopefuls meeting advisers and investors. Britain’s government has christened the area “Tech City” and makes no secret of its hope that the entrepreneurial ventures being dreamed up there can spearhead an economic boost to lift the country out of a long recession. … Greece’s economy could shrink by as much as 5 percent this year, the Athens-based IOBE think tank said, revising down its previous projection and offering a more pessimistic forecast than the country’s foreign lenders. Athens, which has been limping along on bailout funds since 2010, secured its latest lifeline from its European Union and International Monetary Fund lenders on Monday but was told it must keep its promises on cutting public sector jobs and on selling state assets to get all the cash.

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