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Full-Text Articles in Securities Law
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 …
Securitization And Systemic Risk Amid Deregulation And Regulatory Failure
Securitization And Systemic Risk Amid Deregulation And Regulatory Failure
Patricia A. McCoy
During the recent housing boom, private-label securitization without regulation was unsustainable. Without regulation, securitization allowed mortgage industry actors to gain fees and to put off risks. The ability to pass off risk allowed lenders and securitizers to compete for market share by lowering their lending standards, which activated more borrowing. Lenders who did not join in the easing of lending standards were crowded out of the market. Meanwhile, the mortgages underlying securities became more exposed to growing default risk, but investors did not receive higher rates of return. Artificially low risk premia caused the asset price of houses to go …