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Assessing the Proposed Housing Goals
Commentary from Jim Parrott, Laurie Goodman, Wei Li, Ellen Seidman, Jun Zhu     Posted: October 20, 2014

By establishing annual housing goals for mortgages purchased by Fannie Mae or Freddie Mac, the Federal Housing Finance Agency (FHFA) seeks to encourage lending to creditworthy borrowers with low incomes and those in traditionally underserved communities. Setting these goals requires FHFA to walk a fine line to meaningfully expand lending to all qualified applicants without encouraging lending to borrowers who cannot sustain mortgage payments. This commentary critiques the goals proposed by FHFA for 2015 - 2017, examining three central issues: How do the goals interact with other policy issues; Should the FHFA apply both benchmark (prospective) and market (retrospective) goals; and Did the FHFA set its benchmark goals appropriately?


Charting the Course to a Single Security
Commentary from Laurie Goodman, Lewis Ranieri     Posted: September 03, 2014

The Federal Housing Finance Agency has proposed a thoughtful path to creating a single security for Fannie Mae and Freddie Mac, using the Common Securitization infrastructure, in its August Request for Input. While the proposal would benefit from a more definitive time frame, its many strong provisions make it likely to succeed and benefit taxpayers, borrowers and lenders. A key strength of the proposal is the structural provisions – which ensure that the securities backed by both entities will trade equivalently, ending the costly subsidies Freddie has been forced to pay to stay competitive. Ultimately, moving toward this single security should make the market more responsive to borrower and lender needs, boost competition, increase the availability of mortgage credit and potentially help pave the way for GSE reform.


Jun  ZhuHARP Significantly Reduced Mortgage Default Rates
Commentary from Jun Zhu     Posted: September 03, 2014

This commentary discusses the impact of the federal government's Home Affordable Refinance Program (HARP) on mortgage loan default rates between April 2009 and November 2011. We analyze a unique borrower-level data set from Freddie Mac and conclude that HARP more than halved the default rate, a material and significant improvement.


Laurie  GoodmanA Realistic Assessment of Housing Finance Reform
Commentary from Laurie Goodman     Posted: August 01, 2014

In August 2008, the GSEs went into conservatorship, and the clear intent was that they were never going to re-emerge; a new system, with a larger role for private capital providers was to take its place. Nearly six years later, GSE reform remains a dream: the government essentially guarantees 80% of new mortgage debt, and credit availability is limited. In this paper, we take a look at the current system, evaluate the proposals for GSE reform, and offer some thoughts on what is being done and what more can be done without a legislative solution.


Guarantee Fees - An Art, Not a Science
Commentary from Laurie Goodman, Jim Parrott, Ellen Seidman, Jun Zhu     Posted: August 14, 2014

This commentary examines the potential impact of increasing the guarantee fees that Fannie Mae and Freddie Mac charge lenders. We identify the three most important assumptions made in determining the fees, conclude that transparency regarding these assumptions is critical, and that, under any reasonable set of assumptions, the fees should not be increased for the least risky loans. We also conclude that the GSEs' mission should be taken into account in determining the appropriate capital requirement.


Nonbank Specialty Servicers: What's the Big Deal?
Commentary from Pamela Lee     Posted: August 04, 2014

Following the crisis, nonbank specialty servicers rapidly expanded their portfolios of distressed loans. This has contributed to a significant market change: in 2011, the 10 largest mortgage servicers were all banks; by 2013, only five of the top 10 were banks, and the other five were nonbank servicers. The rapid growth and lack of a federal regulator have contributed to significant, heated regulatory scrutiny. This commentary discusses major concerns raised about the largest nonbank servicers, focusing on the three fastest-growing large nonbank servicers. We explore the regulatory and market framework driving their striking growth, then address the major charges against them, in an effort to elevate the debate and inform sound policy.


C. Eugene SteuerleWhat Every Worker Needs to Know About an Unreformed Social Security System
Testimony from C. Eugene Steuerle     Posted: July 29, 2014

In this testimony before the House Ways and Means Committee Subcommittee on Social Security, Eugene Steuerle, Institute Fellow and Richard B. Fisher Chair at the Urban Institute discusses the fairness, efficiency and adequacy questions that arise almost no matter how much growth Congress maintains in Social Security. In particular he addresses three troubling aspects of an otherwise successful program: unequal justice; middle age retirement; and impact on the young.


Eric ToderHow To Stop Corporations From Fleeing U.S. Tax Laws
Commentary from Eric Toder     Posted: July 28, 2014

In a contribution to The Wall Street Journal's MarketWatch, Eric Toder explains why corporations expatriate from the United States and argues that they will continue to do so until Congress addresses the fundamental flaws in the corporate income tax. He then provides some possible solutions to end the erosion of the U.S. corporate tax base.


Gina AdamsInsights on Instability and Children's Development: Commentaries from Practitioners, Policymakers, and Researchers
Commentary from Gina Adams     Posted: July 22, 2014

Concern is growing about the damage that instability can do to children's healthy development. However it has emerged separately across different domains, with little focus on the pervasive and interconnected nature of the issue or on possible cross-cutting policy solutions. In November 2013, the Urban Institute convened policymakers, practitioners, and researchers to discuss the implications of instability for children's development, as well as what we know, need to learn, and need to do across research, policy, and practice. This paper contains essays from some of the meeting participants; a companion report includes the insights from the conference.


Abuse of Structured Financial Products: Misusing Basket Options to Avoid Taxes and Leverage Limits
Testimony from Steven Rosenthal     Posted: July 22, 2014

In this testimony before the Senate Permanent Subcommittee on Investigations, Steve Rosenthal describes how two hedge funds, with the help of two investment banks, purported to convert short-term trading profits into long-term capital gains with derivatives—which lowered the tax rate on their gains from 35% to 15% (the difference in rates for short-term and long-term gains for most of the years in question). He explains why he believes the funds stretched the tax law to achieve their goal. He also recommends legislation to address the misuse of derivatives more comprehensively.