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A New Coalescence In The Housing Finance Reform Debate?, Patricia Mccoy, Susan Wachter
A New Coalescence In The Housing Finance Reform Debate?, Patricia Mccoy, Susan Wachter
Patricia A. McCoy
This policy brief examines recent proposals for reform of the housing finance system.
Representations And Warranties: Why They Did Not Stop The Crisis, Patricia Mccoy, Susan Wachter
Representations And Warranties: Why They Did Not Stop The Crisis, Patricia Mccoy, Susan Wachter
Patricia A. McCoy
During the run-up to the 2008 financial crisis, representations and warranties (contractual statements enforceable through legal action) may have given investors false assurance that mortgage loans were being properly underwritten. This assurance in turn may have contributed to overinvestment in mortgage-backed securities in two ways. First, the assumption that legally enforceable penalties associated with reps and warranties would deter lax underwriting may have led to less monitoring of these contracts than would otherwise have occurred. In turn, the lack of monitoring of actual underwriting practices enabled the spread of lax lending practices. The existence of these reps and warranties and …