ABSTRACT
Because housing is so expensive, its development and acquisition almost always depend on borrowed money. Housing construction, acquisition of existing rental buildings, and the purchase of single-family homes all rely on debt. In 2013, residential mortgages exceeded $10.7 trillion, equivalent to 77% of the total debt of the federal government (Board of Governors of the Federal Reserve System 2013a, Tables L105, L218, L219). 1
Th e housing fi nance system has been structured to a large degree by the federal government, often in response to crisis. Many of the most enduring institutions and elements, including fi xed-rate, self-amortizing mortgages, mortgage insurance, and a secondary mortgage market, stem from the Roosevelt administration’s interventions in response to the Great Depression. Th e government’s response to the savings and loan crisis of the 1980s helped usher in a new phase in housing fi nance, one that was dominated by securitization. Th e housing fi nance system plunged into crisis again in 2007, the ultimate impact of which was still uncertain as of 2014, as a new regulatory and institutional landscape is still taking shape. Th is chapter will describe the main features of the present housing fi nance system, discussing its key institutions, innovations, and regulations.
