Measuring Total Mortgage Market Credit Risk
Freddie Mac
Download Document| Date Published | 2015 |
| Version | |
| Primary Author | Douglas McManus |
| Other Authors | |
| Theme | Risk Management of Housing Finance Institutions |
| Country |
Abstract
The future state of the housing finance system in the United States is the subject of active debate. Central to this discussion is the question of who should hold the exposure to mortgage credit risk in the future. This raises the question of how to measure the total mortgage credit risk. Existing measures of market-wide mortgage credit risk have focused only on newly originated loans rather than the stock of outstanding loans. Yet, from a policy perspective understanding the risk of the entire US mortgage market is of even greater importance, as it represents the total risk that is to be borne by society and the decisions about the future of housing finance will largely determine how this risk will be allocated across individuals, financial institutions and the government.