Tag Archives: housing finance

Reiss on the Future of Fannie and Freddie

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I will be speaking at NYU Law next week on

The Future of Fannie and Freddie

Friday, September 20, 2013
9:00 am – 5:00pm
Reception to follow

Greenberg Lounge, NYU School of Law
40 Washington Square South
New York, NY 10012

Jointly sponsored by:
The Classical Liberal Institute & NYU Journal of Law & Business

 

This conference will bring together leaders in law, finance, and economics to explore the challenges to investment in Fannie Mae and Freddie Mac, and the future possibilities for these government-sponsored entities (GSEs).  Panels will focus on the reorganization of Fannie and Freddie, as well as the recent litigation surrounding the Treasury’s decision to “wind down” these GSEs.  Panelists will explore the legal issues at stake in the wind down, including the administrative law and Takings Clause arguments raised against the Treasury and Federal Housing Finance Agency.  Panelists will also look at economic policy and future prospects for Fannie and Freddie in light of legislation proposed in the House and the Senate.

Conference Panels:

  • The Reorganization of Fannie Mae and Freddie Mac
  • Fannie Mae, Freddie Mac, and Administrative Law
  • Conservatorship and the Takings Clause
  • The Future of Fannie and Freddie

Confirmed Participants:

  • Professor Barry Adler (NYU)
  • Professor Adam Badawi (Washington University)
  • Professor Anthony Casey (Chicago)
  • Charles Cooper (Cooper & Kirk PLLC)
  • Professor Richard Epstein (NYU)
  • Randall Guynn (Davis Polk & Wardwell LLP)
  • Professor Todd Henderson (Chicago)
  • Professor Troy Paredes (former SEC Commissioner)
  • Professor David Reiss (Brooklyn)
  • Professor Lawrence White (NYU Stern)

Building a Model for Housing Finance

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Following up on Friday’s post, I want to discuss Chambers, Garriga and Schlagenhauf’s draft that they recently posted to SSRN (free here).  It presents some interesting historical analogies to the issues we face as we attempt to chart a new direction for federal housing policy.

They too review the housing subsidies that exist in the financing system and in the tax code.  They attempt to “study the effects of changes in government regulation on individual incentives and relative prices” (4)  They include an interesting Table (2) on page 8 that shows the growing percentage of home mortgages that were insured or guaranteed by the FHA and VA.

What I find most interesting about this article is that it attempts to model the impact of better financing terms on the housing market.  For instance, they argue that their “model suggest that the extension of the FRM contract from 20 to 30 years can explain around 12 percent of the increase in ownership” for a certain period of time. (25)  More generally, they find that the “total impact of mortgage innovation is approximately 21 percent” when combined with “a narrowing mortgage interest rate wedge . . ..” (31) I would love to see more economics articles that model the impact of credit terms on housing prices and homeownership rates.  While this seems fundamental to housing economics, there is less out there about this than there should be.

While their conclusion that “mortgage innovation did make a significant contribution to the increase in homeownership between 1940 and 1960”  is not surprising, their model helps us understand why that is the case. (26)