The Measurement and Management of Mortgage Credit Risk in the United States: Implications for Emerging Mortgage Markets (July, 2007, 61 p.)
The housing finance system of the United States is a marvel in its size, scope, and efficiency. One key feature of the U.S. housing finance system is its integration into the broader financial markets, providing Americans with access to cheap sources of capital. As a result, Americans enjoy high-quality housing and high homeownership rates. Thus, housing finance is of central importance to two critical sectors of the national economy: one obvious—the housing industry— and the other less obvious—the larger financial system of the United States.
Americans use the housing finance system daily and seem to take it for granted, whether taking out a first-time mortgage or refinancing their mortgages, and assume that the necessary mortgage capital will always be available on reasonably convenient terms. Few realize the complex underpinnings that are necessary to measure and manage credit risk, which is the most important factor in the sustained viability of any mortgage market, nor do they understand the key role of the government in unleashing the powerful forces of the private sector that consistently delivers the capital borrowers need to take advantage of homeownership.
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