The capital structure and governance of a mortgage securitization utility

Patricia C. Mosser, Joseph Tracy and Joshua Wright

No 644, Staff Reports from Federal Reserve Bank of New York

Abstract: We explore the capital structure and governance of a mortgage-insuring securitization utility operating with government reinsurance for systemic or ?tail? risk. The structure we propose for the replacement of the GSEs focuses on aligning incentives for appropriate pricing and transfer of mortgage risks across the private sector and between the private sector and the government. We present the justification and mechanics of a vintage-based capital structure, and assess the components of the mortgage guarantee fee, whose size we find is most sensitive to the required capital ratio and the expected return on that capital. We discuss the implications of selling off some of the utility?s mortgage credit risk to the capital markets and how the informational value of such transactions may vary with the level of risk transfer. Finally, we explore how mutualization could address incentive misalignments arising out of securitization and government insurance, as well as how the governance structure for such a financial market utility could be designed.

Keywords: financial market utility; mortgage finance; GSE; cooperatives; MBS (search for similar items in EconPapers)
JEL-codes: E02 G01 G21 G28 G32 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2013-10-01
New Economics Papers: this item is included in nep-ban, nep-rmg, nep-upt and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr644.pdf (application/pdf)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr644.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fednsr:644

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Staff Reports from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().