Affordable Housing Institute : US

[Continued from Part 1 and Part 2.]

Unbeknownst to most home borrowers, our residential capital markets have been revolutionized by the takeover of the derivatives, byproducts of securitization.
 

Our derivatives are sneaking up on you

In general, this risk distillation should yield more efficient use of capital, and therefore lower spreads and lower cost to […]

[Continued from yesterday’s Part 1.]

Yesterday we saw that every financial transaction creates two new sets of risks, one for each party: Borrowers can lose their collateral, and lenders can lose their principal. Indeed, typically when one loses, the other loses also, so while they have opposed economic (every buck goes to one of […]

“Risk? I love risk!”

Wine is good for us, but a big slug of pure alcohol can kill you.
 

This is your brain after booze

It’s all a question of which, and how much, and when.

Like alcohol for people, risk is good for financial markets. Like alcohol, it stimulates, and lowers inhibitions. […]

 
A few days back, I posted on the GSEs’ performance in improving housing affordability, drawing heavily from a January, 2007 speech, now published by St. Louis Federal Reserve, by Federal Reserve Bank president of St. Louis, William Poole. 
 

 
Mr. Poole’s speech is a gold mine of insight.  As I’ve previously posted, the GSEs’ fundamental policy value equation […]

Anyone who works in affordable housing finance periodically encounters the dreaded bureaucracy, whose secrets are forbidden for outsiders to know.

And they’re not all that’s secret
 
Since affordability implies financial complexity because of the cost-value gap, most but not all of these bureaucracies are governmental.  People never exposed to such entities often find themselves groping for light […]