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### I. INTRODUCTION — Key points and findings
- Home ownership central to U.S. policy discourse; various Administrations promoted increased home ownership (Stephens, 2003; HUD 2005).
- Post-crisis policy context: Treasury Secretary Geithner and Administration proposals call for “fundamental reform” toward a more stable, privately-oriented housing finance system (U.S. Treasury, 2011).
- Cited positive externalities:
  - Ten percent increase in local homeownership rate increases local housing prices by 2.5 percent (Glaeser and Shapiro, 2003).
  - Children of homeowners are about 25 percent less likely to drop out of school than children of comparable renters (Green and White, 1997).
- Counterpoint: Homeownership may hinder labor mobility and raise unemployment (Oswald (1997, 1998)).
- U.S. housing finance features:
  - Complex system with many indirect/off-balance-sheet measures (e.g., mortgage interest tax deduction, capital gains tax exclusion); some measures in place since 1913.
  - Federal mortgage credit, insurance and guarantee programs include FHA, VA, and guarantees by GSEs.
- Fiscal magnitude and distribution:
  - Home-related tax expenditures represent 1.3 percent of GDP and are expected to reach 1.8 percent of GDP by 2016.
  - Most programs are costly and benefit middle- and high-income households; effectiveness questioned (Tsounta, 2010).
- Homeownership rates:
  - Essentially unchanged in last 40 years, hovering between 64–69 percent.
- Paper focus:
  - Analyses federal financial support to U.S. housing, fiscal cost, and effectiveness.
  - Concentrates on the mortgage interest deduction and support to GSEs.
  - Concludes the system is unsustainable in fiscal cost and inefficiencies; proposes gradual reform with limited impact on homeownership.
- Paper structure outline:
  - Section II: history and evolution.
  - Section III: current federal programs (tax, credit, guarantees).
  - Section IV: literature review.
  - Section V: economic and budgetary cost estimates.
  - Section VI: OECD country policies.
  - Section VII: international reform experiences.
  - Section VIII: conclusion.

### II. HISTORICAL TRENDS AND INSTITUTIONAL EVOLUTION
- U.S. homeownership rates — historical highlights:
  - Pre-World War II: 43–48 percent.
  - Late 1960s: almost 64 percent.
  - Mid-1980: 65.8 percent.
  - 1994: seasonally adjusted 64 percent.
  - 2004 peak: 69 percent (increase of 12 million homeowners from 1994).
  - End-2010: 66½ percent (levels last seen in 1998).
  - Disparate impacts post-2007:
    - Black homeownership rate: 48 percent in 2007Q1 → 44.8 percent in 2010Q4.
    - White non-Hispanic homeownership rate: fell by 0.7 percentage points to 74.2 percent over same period.
- Institutional milestones (selected dates and purposes):
  - 1932: Federal Home Loan Banking System — Provide funds to building and loan associations.
  - 1933–36: Home Owner’s Loan Corporation — Acquire defaulted mortgages and reinstate as fixed rate 20-year amortized loans.
  - 1936: Federal Housing Administration — Encourage mortgage investment via home loan insurance.
  - 1938: Federal National Mortgage Association (Fannie Mae) — Facilitate secondary market for FHA-insured mortgages.
  - 1944: Veterans Guarantee Program — Assist veterans.
  - 1956: First modern private mortgage insurance company created.
  - 1968: Fannie Mae privatized; Ginnie Mae created for government-insured mortgage securitization.
  - 1970: Freddie Mac — Securitize mortgages from savings and loan associations.
  - 2008: Federal Housing Finance Agency oversight; GSEs placed in conservatorship; Government Sponsored Enterprise Credit Facility established.
- Market concentration by end-2003:
  - Fannie Mae and Freddie Mac guaranteed or held more than $3.6 trillion of mortgages — about 60 percent of the market they could participate in and 43 percent of the overall market.
- FHA and private mortgage insurance:
  - FHA Mutual Mortgage Insurance (MMI) insures mortgages for a fee; premium structure evolved from fixed on unpaid balances → fixed at closing → sliding scale based on initial loan-to-value ratio.
  - Between 1957 and 1973 every state passed enabling statute for private mortgage insurance.

### BOX 1 — Some Basic Facts on GSEs (summary)
- Primary activities:
  - Purchase conventional conforming mortgages; hold portfolios or package into MBS; issue and guarantee majority of residential MBS.
  - Guarantee resulted in investors treating GSE guarantees like government guaranty.
- Market share and fees:
  - 2010: purchased or guaranteed 70 percent of mortgages originated.
  - Historical guarantee fee: about 0.20 percent annually.
- Capital and leverage:
  - Charter capital requirement: 45 basis points of outstanding MBS.
  - Statutory leverage ratio: 40 ($1 of equity supports $40 of earning assets).
- Profitability and portfolios:
  - Historical return on equity around 15 percent.
  - Retained portfolios up to 20 percent of all outstanding U.S. mortgage securities.
  - Returns on capital from retained portfolios often above 30 percent.
- Risk profile:
  - Shift into sub-prime and Alt-A during the boom; funding via short-term debt for long-term assets created maturity mismatch.
  - Conservatorship in late 2008 due to capital shortfalls and liquidity dysfunction.
- Government support during crisis:
  - Government took over more than $5 trillion in credit guarantees by end-2008 (CBOa, 2009).
  - Federal support to GSEs totaling around $150 billion.
- Servicers and FHA specifics:
  - Mortgage servicers typically retain a portion of borrower monthly payment (example: receiving 25 basis points of mortgage amount).
  - FHA borrower upfront mortgage insurance premium: today 1.5 percent; annual insurance premium starts at around 0.5 percent of loan balance until loan-to-value falls below 75 percent.

### III. MORTGAGE INTEREST DEDUCTION — EMPIRICAL FINDINGS AND DISTRIBUTIONAL EFFECTS
- Limited effect on aggregate homeownership:
  - Cross-country: Canada and Australia have similar homeownership rates without mortgage interest deduction.
  - Intertemporal U.S.: homeownership hovered between 63–68 percent for over 50 years while deduction increased.
  - Gyourko and Sinai (2003): deduction increased by over 112 percent in real terms between 1979 and 1999 while homeownership rose from 40.9 million to 69.7 million (70 percent increase).
  - Footnote: poor and young (homeownership margin groups) rarely use deduction even when owners.
- Fiscal cost:
  - Mortgage interest tax deduction costs around 0.7 percent of GDP every year (OMB, 2011).
- Capitalization and volatility:
  - Gyourko and Sinai (2003): prices in certain markets about 20 percent higher on average due to housing subsidies.
  - Van den Noord (2005): euro area countries with highest subsidies have most volatile house prices.
- Regressivity and geographic concentration:
  - Canner et al. (2002): about 50 percent of households with outstanding mortgages choose to itemize.
  - 80 percent of homeowners with annual incomes above $80,000 and positive mortgage debt choose to itemize.
  - Gyourko and Sinai (2003): California received 18.7 percent of aggregate subsidy with 9.4 percent of nation’s homeowners; New York received 9.5 percent of aggregate subsidy with 5.3 percent of homeowners.
- Distortionary effects on leverage and portfolio choice:
  - Studies find household leverage highly sensitive to interest deductibility (Dunsky and Follain, 2000; Follain and Dunsky, 1997; Follain and Ling, 1991; Ling and McGill, 1998; Hendershott, Pryce, and White 2003).
  - Follain and Melamed (1998): removal of deduction would reduce mortgage debt by 40 percent; declines skewed to higher incomes: 54 percent at incomes of $55,000 and 69 percent at incomes over $110,000.
  - Estimated tax revenue increase from removal would be only a quarter to a third of potential because mortgage debt would be run down.

### IV. FINANCING SIDE: GSE FUNDING ADVANTAGES AND MARKET EFFECTS
- GSE funding advantage estimates:
  - CBO (2001): overall funding advantage to GSEs about 41 basis points; implicit government guarantee advantage for MBS issuances around 30 basis points; just over half (25 basis points) passed to mortgage borrowers.
  - Other studies indicate a 25–70 basis points cost advantage (Ambrose and Warga (2002); Nothaft et al. (2002)).
  - Passmore, Sparks, and Ingpen (2002) and McKenzie (2002): conforming loan mortgage interest rates 20–25 basis points lower than without GSE subsidy.
- Risks and distortions:
  - Implicit guarantee and lower rates may cause over-investment in housing and moral hazard (White (2002); Wallison, Stanton and Ely (2004)).
  - GSEs may have crowded private lenders into peripheral/riskier markets.
  - Private-label MBS issuance exploded between 2004 and 2007 focused on higher-risk segments; post-crisis private-label MBS market remains almost completely shut down.

### V. COSTS OF GOVERNMENT INTERVENTION — ESTIMATES AND BUDGETARY DATA
- Treasury/OMB estimates (FY2012 and projections):
  - Tax expenditures on housing estimated at around $230 billion in FY2012, rising to over $330 billion by FY2016.
- Mortgage-related tax expenditures (selected table excerpts; Billions of U.S. dollars):
  - Deductibility of mortgage interest on owner-occupied homes: 2012 = 98.6; 2016 = 143.7; 2012–16 cumulative = 609.2.
  - 2012 Total Tax Expenditures for Housing: 229.7.
  - 2016 Total Tax Expenditures for Housing: 335.1.
  - 2012–16 Total Tax Expenditures for Housing: 1,404.8.
  - Homeowners 2012: 208.0; 2016: 304.1; 2012–16: 1,272.0.
  - Exclusion of net imputed rental income 2012: 50.6; 2016: 75.5; 2012–16: 302.8.
  - Deductibility of State and local property tax on owner-occupied home 2012: 24.9; 2016: 31.4; 2012–16: 142.3.
  - Capital gains exclusion on home sales 2012: 35.2; 2016: 2.4; 2012–16: 216.8.
- Table 5 highlights (Income Tax Expenditures Ranked by Total, Billions of U.S. dollars):
  - Exclusion of employer contributions for medical insurance premiums and medical care: 2012 = 1,184; 2012–16 = 1,071 (table formatting in source).
  - Deductibility of mortgage interest on owner-occupied homes: 2012 = 299; 2012–16 = 609.
  - Exclusion of net imputed rental income: 2012 = 55; 2012–16 = 303.
  - Capital gains exclusion of home sales: 2012 = 123; 2012–16 = 217.
- Federal financing program subsidy estimates:
  - CBO (2001): Fannie Mae, Freddie Mac and the FHLB system received $13.6 billion in subsidies in the year 2000, mostly from implicit government guarantee on their debt.
  - CBO (2009a): USDA, VA, and Ginnie Mae programs resulted in no significant costs or savings to federal government in 2009; FHA’s MMI program subsidy estimates consistently negative (fee collections exceed net payments on defaults on present value basis).
  - CBO (2009a): insuring more than $300 billion of new mortgages through MMI program in 2009 did not result in savings to the government.

### VI. INTERNATIONAL COMPARISONS AND ALTERNATIVE DESIGNS
- Canada:
  - No housing GSEs; mortgage interest not deductible.
  - Main tax expenditure: non-taxation of capital gains from principal residence = C$3.9 billion in 2010 (around ¼ of 1 percent of GDP).
  - First-Time Home Buyers' Tax Credit: non-refundable tax credit up to C$750; estimated cost around C$145 million in 2010.
  - Home Buyers’ Plan: withdraw up to C$25,000 from RRSP tax-exempt if repaid within 15 years.
  - CMHC: dominant mortgage credit insurer with 100 percent explicit government guaranty through NHA; end-2010 CMHC covered 96 percent of securitization funding to residential mortgage credit.
- OECD heterogeneity in mortgage-interest treatment:
  - Many countries exempt capital gains on principal residence; only a few provide mortgage interest deduction, often limited:
    - Germany: mortgage interest deductible only when property is rented.
    - France: deductible for loans extended as of August 2007, limited to maximum annual tax credit per couple of €1,500 and only for five years.
    - Ireland: since May 1 2009, deduction restricted to first seven years; plans to abolish by end-2017.
    - Spain: from January 1 2011, deduction limited by income thresholds (detailed below).
  - Countries without mortgage interest deduction include Canada, the United Kingdom, Australia and New Zealand.
- Examples of mortgage insurance/guarantee designs:
  - Netherlands: public NHG guarantee for loans up to around €350,000 with borrower fee 0.3 percent; NHG-guaranteed mortgages carry risk weighting of zero for banks.
  - Japan: Japan Housing Finance Agency (JHF) guarantees ~25 percent of mortgages.
  - Australia: private insurers dominate; privatized HLIC in 1997 and government guarantees withdrawn.

### VII. PHASING REFORMS — INTERNATIONAL EXPERIENCES AND LESSONS
- United Kingdom:
  - Reduced and then abolished mortgage interest deductibility: limit to maximum loan of £30,000 starting 1983; tax rate phased from 25 percent to 10 percent by 1993; abolished in 2000.
  - After abolition, house prices rose 145 percent from 2000 to 2007 peak.
- Netherlands:
  - Series of measures since 2001 limiting deductibility: restrict deduction to funds used for purchase/renovation, limit duration to 30 years, changes affecting high-value houses (above €1.6 million).
- Ireland:
  - Since May 2009 deduction available only for first seven years of mortgage; first-time buyer special provisions noted.
- Spain:
  - From January 1 2011 taxpayers earning over €24,107/year no longer enjoy deduction; incomes up to €17,700 retain full deduction (15 percent of annual mortgage interest and principal up to €9,015); linear phase down between €17,700 and €24,107.
- Australia:
  - Privatized HLIC in 1997 and withdrew government guarantees; homeownership rates essentially unchanged; private mortgage insurance insures 100 percent of mortgage exposure similar to Canada.
- Cautionary evidence from Sweden:
  - Reduced deductible tax rate to 50 percent in 1985 (from 80 percent) without negative impact.
  - Subsequent reduction to 30 percent in 1991 during severe recession coincided with housing market collapse: nominal house prices declined by average annual rate of 10¼ percent in 1992–93.
  - Lesson: phase reforms over time and implement in healthy market conditions.

### VIII. POLICY OPTIONS, RECOMMENDATIONS, AND FISCAL IMPLICATIONS
- U.S. reform proposals highlighted:
  - National Commission on Fiscal Responsibility and Reform (December 2010) proposed:
    - Lower mortgage interest deduction cap from $1 million to $500,000.
    - Restrict deduction to primary residences.
    - Convert deduction into a 12 percent non-refundable tax credit.
  - FY 2011 Administration proposal: cut deduction rate for itemized expenses for those making more than $250,000 to rate paid by middle class (stalled in Congress).
  - Administration budget proposals: limit tax rate at which high-income taxpayers can take itemized deductions to maximum of 28 percent, affecting married taxpayers with incomes over $250,000 and singles over $200,000 (Office of Budget and Management, 2011).
- Revenue and distributional estimates:
  - CBO (2009b): reducing $1 million cap by $100,000 a year beginning in 2013 and ending at $500,000 in 2018 could generate $41.4 billion in additional revenues over 10 years.
  - Converting mortgage interest deduction to a 15 percent tax credit for everyone (with mortgage amount cap) could increase revenues by $387.6 billion over 10 years.
- Recommended strategy:
  - Gradual phasing and careful timing of reforms to avoid large disruptions (informed by U.K., Netherlands, Sweden experiences).
  - Over the medium term, downsize GSEs’ role in housing finance, make them fully public and more narrowly focused to better complement private-label markets.
  - Replace costly, regressive tax expenditures with less complex, cheaper systems while protecting labor mobility and avoiding undue distortion in fragile housing markets.

*Source: IMF working paper content provided in the supplied PDF excerpt.*

### References .............................................................................................................

### References

### Figures (listed)
- 1. Homeownership Rates in Select OECD Countries
- 2. Homeownership Rate in United States, 1890–2010
- 3. Composition of FRM, ARM, CM Over time
- 4. A Schematic View of the Mortgage Intermediation Process
- 5. Mortgage Origination by Type
- 6. Decomposition of Mortgages Outstanding end-2010
- 7. Distribution by Income Class of the Mortgage Interest Tax Deduction 2007
- 8. Tax Benefit for U.S. States
- 9. Fixed Rate Mortgages
- 10. Tax Expenditures by Beneficiary

### Box
- 1. Some Basic Facts on GSEs

### Tables (listed)
- 1. History of Housing Finance in the United States
- 2. Tax Expenditures on Housing (by Beneficiary)
- 3. Competing Functions by Various Institutions
- 4. Total Expenditures on Housing ( by Beneficiary, per Fiscal Year)
- 5. Income Tax Expenditures Ranked by Total Fiscal
- 6. United States and Canada: Housing Finance
- 7. Canada and United States Mortgage Funding
- 8. Tax Expenditures on Housing in Select OECD Countries29
- 9. Tax on Housing Capital Gains
- 10. Tax on Imputed Rents
- 11. Mortgage Interest Payments Tax Deductibility
- 12. Select Countries: Government Mortgage-Market Support

### I. INTRODUCTION — Key points and findings
- Home ownership has been a key component of the “American dream” with various Administrations promoting increased home ownership (Stephens, 2003; HUD 2005).
- Post-crisis policy context: Treasury Secretary Geithner indicated that “fundamental reform” of the government's role in the housing finance market is needed; Administration proposals aim at establishing a more stable, privately-oriented and sound housing finance system (U.S. Treasury, 2011).
- Positive externalities of homeownership cited:
  - Neighborhood maintenance and improvements; Glaeser and Shapiro (2003) find a ten percent increase in local homeownership rate increases local housing prices by 2.5 percent.
  - Children of homeowners are about 25 percent less likely to drop out of school than the children of comparable renters (Green and White, 1997).
  - Homeownership promotes household wealth accumulation and retirement strategy, with spillover effects on the broader economy.
- Counterpoint: Oswald (1997, 1998) argues homeownership leads to higher unemployment by hindering labor mobility.
- U.S. housing finance policy features:
  - Complex system with many measures, most indirect/off balance sheet (e.g., mortgage interest tax deduction, capital gains tax exclusion). Some measures in place since 1913.
  - Federal mortgage credit, insurance and guarantee programs include FHA, VA, and guarantees by GSEs.
- IMF (2011) finds the United States has the most comprehensive government intervention among advanced economies in housing finance.
- Fiscal magnitude and distribution:
  - Home-related tax expenditures represent 1.3 percent of GDP and are expected to reach 1.8 percent of GDP by 2016.
  - Most programs are significantly expensive and mostly benefit middle- and high-income households; their effectiveness is questionable (Tsounta, 2010).
- Homeownership rate dynamics:
  - U.S. homeownership rates have been essentially unchanged in the last 40 years, hovering between 64–69 percent.
  - Cross-country: U.S. rates mimic other Anglo-Saxon countries and are mid-pack among OECD countries; American households purchase earlier in life with lower downpayments relative to Japan (Glaeser and Gyourko, 2008).
- Paper focus and conclusion preview:
  - Analyzes federal programs providing financial support for U.S. housing, describes fiscal cost, evaluates effectiveness in encouraging homeownership.
  - Concentrates on the most expensive policies including the mortgage interest deduction and support to GSEs.
  - Finds current housing finance system is unsustainable in fiscal cost and inefficiencies.
  - Proposes gradual reform of expensive interventions without significant impact on homeownership, drawing on other countries’ experiences.
- Paper structure summary:
  - Section II: history of homeownership rates and evolution of U.S. housing finance system.
  - Section III: current federal housing programs, emphasis on tax system and federal credit and guarantee programs.
  - Section IV: literature review of impact of government intervention in housing finance.
  - Section V: estimates of economic and budgetary costs.
  - Section VI: housing finance policies in other OECD countries.
  - Section VII: how other countries diminished government intervention.
  - Section VIII: conclusion.

### II. A LITTLE BIT OF HISTORY — Major themes

A. U.S. Homeownership Rate: Historical perspective
- Pre-World War II: homeownership rate ranged between 43 and 48 percent.
- Post-World War II developments:
  - Recovery from the Great Depression, VA government-insured mortgage loans, pent-up demand, and modestly priced new construction pushed homeownership to almost 64 percent by the late 1960s.
  - Homeownership continued to rise in the 1970s, reaching 65.8 percent in the middle of 1980.
  - Factors for 1970s rise: baby boomers entering first-time homebuyer cohort and low real long-term ex-post mortgage interest rates averaging 150 basis points over the 1970s, negative for three years in that period.
- 1980s: stagnation; ownership for married couples under age 35 fell by more than 7 percentage points between 1980 and 1990 (Follain, Hendershott, and Ling, 1992); decline attributed to the demise of inflation and tax rate cuts rather than reduced affordability (Green, 1996).
- 1990s–early 2000s:
  - Homeownership rose from a seasonally adjusted 64 percent in 1994 to a 69 percent peak in 2004 (an increase of 12 million homeowners).
  - Contributing factors: 1990s economic boom, demographic factors, decline in mortgage interest rates, expanded access to mortgage credit and complex lending (Gramlich, 2004; Doms and Motika, 2006; Jaffee, 2008).
  - Jaffee (2008) estimates 6.6 million net homeowners were added between 2000 and 2006, of which 1.4 million are attributed to subprime lending.
  - Doms and Krainer (2006) attribute around a third of the 1990s change to demographics; Gabriel and Rosenthal (2005) find household characteristics explain most of the 1990s increase and conclude mortgage market interventions are unlikely to have large effects.
- Post-2004 downturn:
  - Ownership rates declined from the 2004 peak; at 66½ at end-2010, levels last seen in 1998.
  - Disparate impacts: Black homeownership rate fell from 48 percent in 2007Q1 to 44.8 percent in 2010Q4; White non-Hispanic homeownership rate fell by 0.7 percentage points to 74.2 percent over the same period.
- Notes and data sources:
  - Sources include U.S. Bureau of the Census (1989), Haver Analytics, author’s estimates.
  - Footnotes indicate debates and alternative findings (e.g., Oswald (1997, 1998); Gabriel and Rosenthal (2005); Doms and Krainer (2006)).

B. Government Intervention: Financing side — Historical evolution and institutions
- Evolutionary arc: from informal/communal arrangements to complex system with intermediaries performing funding, lending, and servicing while pursuing homeownership promotion.
- Policy responses to shocks and innovations shaped system (Table 1 summarizes key institutional creations over time).
- Key institutional milestones and reasons for creation (exact entries from Table 1):
  - 1932: Federal Home Loan Banking System — Provide funds to building and loan associations.
  - 1933-36: Home Owner’s Loan Corporation — Acquire defaulted mortgages and reinstate them as fixed rate 20-year amortized loans.
  - 1936: Federal Housing Administration — Stimulate housing construction by encouraging mortgage investment via offering home loan insurance.
  - 1938: Federal National Mortgage Association (Fannie Mae) — Facilitate a secondary market for FHA-insured mortgages.
  - 1944: Veterans Guarantee Program — Assist veterans in their transition to civilian life.
  - 1956: First modern private insurance company was created — Demand for private insurance driven by limitations of FHA loan size and downpayment requirements; private insurers provided credit enhancements required by Freddie Mac and Fannie Mae for purchasing (or guaranteeing) mortgages with loan-to-value ratio above 80 percent.
  - 1968: Fannie Mae split into Government National Mortgage Association (Ginnie Mae) and privately-held Fannie Mae — Fannie Mae authorized to buy and sell non-government backed mortgages to raise additional funds for mortgage originators; motivated by liquidity challenges in 1966.
  - 1970: Freddie Mac — Securitize mortgages issued by savings and loan associations.
  - 2008: Federal Housing Finance Agency — Oversight authority for Fannie Mae and Freddie Mac, under conservatorship.
  - 2008: Government Sponsored Enterprise Credit Facility — Ensure availability of credit for Fannie Mae and Freddie Mac.
- Early federal interventions during Great Depression:
  - 1933 creation of HOLC and RFC to liquidate nonperforming bank loans and bail out insolvent lenders.
  - 1932 creation of FHLBanks as a liquidity facility for Savings and Loans (first housing-related government-sponsored enterprise).
  - 1932–1938: FHA formed to provide mortgage default insurance for lenders; private mortgage insurance later authorized.
- Fannie Mae and Ginnie Mae history:
  - 1938: Fannie Mae established as government-owned agency to stabilize market for FHA mortgages; operated at small scale, purchased FHA and later VA mortgages.
  - 1968 privatization of Fannie Mae to buy conventional mortgages; Ginnie Mae established to securitize government-insured mortgages (explicit government guarantee).
- Freddie Mac formation and MBS market:
  - 1970: Freddie Mac created as part of FHLBanks to increase liquidity for Savings and Loans.
  - MBS market formed in early 1970s with Ginnie Mae and Freddie Mac security programs; Fannie Mae issued first MBS in 1981.
- Market concentration and scale by end-2003:
  - Fannie Mae and Freddie Mac guaranteed or held more than $3.6 trillion of mortgages, about 60 percent of the market in which they were allowed to participate and 43 percent of the overall market; GSE dominance increased further following housing bubble collapse during the Great Recession.
- Additional institutional notes:
  - FHA’s Mutual Mortgage Insurance (MMI) program insures mortgages on single- and multifamily homes issued by private lenders in exchange for a fee; FHA insurance funding mechanisms evolved (fixed premium on unpaid balances → fixed premium at closing → sliding scale based on initial loan-to-value ratio).
  - Between 1957 and 1973 every state passed enabling statute for private mortgage insurance, ending FHA’s monopoly.
  - The U.S. mortgage market did not develop a covered bond market similar to European markets.

*Source: IMF (2011).*

### Box 1. Some Basic Facts on GSEs

### Box 1. Some Basic Facts on GSEs

### GSEs' business model and market role
- Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) created by the Congress with a special mandate but were privately owned.
- Business activity:
  - Purchase primarily conventional conforming mortgages (meeting GSEs’ underwriting standards and specific loan limits) from private lenders/mortgage originators to hold in their own portfolios or package into mortgage-backed securities (MBS) which are subsequently sold to investors.
  - Issue and guarantee the majority of the residential MBS issued in the United States.
  - In exchange for a guarantee fee, they guarantee the timely payment of interest and principal on the securities; investors have been treating that guarantee identically to a government guaranty.
- Market share and volumes:
  - In 2010, the two GSEs purchased or guaranteed 70 percent of the mortgages originated.
- Guarantee fees and investor treatment:
  - As compensation for guarantees, the two GSEs historically charged a fee of about 0.20 percent annually (a fee as a percentage of the outstanding loan balance).
  - The guarantee required that the GSEs provided timely payment of all interest and principal in the event the mortgage became delinquent.

### Financial structure, capital, and profitability
- Charter capital requirement:
  - Their charter required that they hold capital equal to 45 basis points of their outstanding MBS to backstop the guarantees.
- Historical profitability:
  - For most of their history (the current housing market meltdown has been the exception), the GSEs were profitable, earning a return on equity of around 15 percent.
- Retained portfolios:
  - Fannie Mae and Freddie Mac maintain retained mortgage portfolios on their balance sheets.
  - Those mortgages have represented as much as 20 percent of all outstanding U.S. mortgage securities.
  - Portfolios primarily funded by issuing “agency bonds,” for which investors had presumed an implicit Treasury guarantee (now explicit given conservatorship).
- Leverage and returns on retained portfolios:
  - Fannie Mae and Freddie Mac face a statutory leverage ratio of 40, meaning that $1 of equity supports $40 of earning assets.
  - Profitability of retained portfolios came from the spread between interest earned on mortgage assets minus interest paid on agency bonds.
  - The spread was large enough to give returns on capital often above 30 percent.
  - High returns and leverage created incentives to grow portfolios rapidly and take riskier positions.

### Risk-taking incentives, asset composition, and maturity mismatch
- Portfolio risk shifts:
  - During the housing boom, GSEs started investing heavily in sub-prime and Alt-A mortgages instead of traditional safer conforming loans.
- Funding and maturity mismatch:
  - They used short-term debt to fund long-term mortgage assets; this mismatch made them vulnerable to large interest rate changes and liquidity crises.
- Risk retention:
  - For both business lines (guarantee and retained portfolios), the two GSEs retain (through guarantee or ownership) all the risks of possible default by mortgage borrowers.
  - The retained portfolios additionally created significant interest rate and liquidity risks.
  - Investors continue to bear the interest rate and prepayment risk (IMF, 2011).

### Conservatorship and government support during the crisis
- Capital shortfalls and market dysfunction:
  - Given expanding credit losses and expected losses on retained portfolios (primarily from subprime and Alt-A positions), capital requirements were going to be violated and prospects for additional private capital were poor.
  - Investors were unwilling to roll over maturing debt, raising the probability of bankruptcy and systemic paralysis of the U.S. mortgage market.
- Government action and scale:
  - As a result, the two GSEs were placed into conservatorship mode in late 2008 by their federal regulator (Federal Housing Finance Agency).
  - The government took over more than $5 trillion in credit guarantees by end-2008 (CBOa, 2009).
  - Fannie Mae and Freddie Mac were provided with unlimited access to “bailout” capital by the federal government; so far, they have received federal support totaling around $150 billion.

### Mandate, subsidies, and affordable housing goals
- Special mandates and governance:
  - GSEs’ special mandate involved a requirement, since 1992, to comply with annual Affordability Housing Goals to facilitate homeownership to low-income and underrepresented groups.
  - Federal charters required them to promote liquidity and stability in the secondary market for mortgages since their inception.
  - Required public representation on their boards.
- Explicit federal subsidies and privileges spelled out in their charters:
  - Exemptions from state and local taxation.
  - Exemptions from Securities and Exchange Commission registration requirements.
  - Right to use the Federal Reserve as their fiscal agent, among other special privileges.

### Empirical indicators and selected data points from acquisitions and mortgage composition
- Historical guarantee fee charged: about 0.20 percent annually.
- Charter capital requirement: 45 basis points of outstanding MBS.
- Leverage: statutory leverage ratio of 40 ($1 of equity supports $40 of earning assets).
- Retained portfolios: up to 20 percent of all outstanding U.S. mortgage securities.
- 2010 market share: purchased or guaranteed 70 percent of mortgages originated.
- Historical profitability metrics:
  - Return on equity around 15 percent.
  - Returns on capital from retained portfolios often above 30 percent.
- Government support in crisis:
  - Government took over more than $5 trillion in credit guarantees by end-2008.
  - Federal support to GSEs totaling around $150 billion.
- Mortgage servicers:
  - Typically paid by retaining a portion of the borrowers’ monthly payment (e.g., receiving 25 basis points of the mortgage amount).
- FHA premiums:
  - Borrower pays an upfront mortgage insurance premium (today 1.5 percent) and an annual insurance premium that declines over the life of the loan (today, it starts at around 0.5 percent of the loan balance) until the loan-to-value ratio falls below 75 percent.

### Role of other institutions in the U.S. housing finance system
- Mortgage insurance and guarantee providers:
  - Private mortgage insurers compete with government insurance offered by the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).
  - FHA provides mortgage insurance on homes for lower-income families; VA partially guarantees lenders and charges a flat loan-guarantee fee.
  - FHA premiums have been historically self-supporting; primary FHA single-family mortgage program has not required government appropriations and has been consistently profitable except in exceptional periods.
- Market structure and securitization:
  - The United States is unique because of the preponderance of government-sponsored housing finance agencies involved in securitization markets (Fannie Mae, Freddie Mac, and Ginnie Mae) and mortgage insurance (FHA and VA).
  - Ginnie Mae securities are collateralized by FHA/VA mortgages and are explicitly backed by the government.
  - Prior to the crisis, a well-developed secondary mortgage market allowed originators to sell almost any type of mortgage into multiple channels (GSEs, mortgage conduits, investment banks, and pools of managed assets).

*Source: Box 1. Some Basic Facts on GSEs (excerpt).*

### 0.0009 percent, since the deduction is targeted towards the rich, who would be

### _wp11191 - 0.0009 percent, since the deduction is targeted towards the rich, who would be

### Mortgage Interest Deduction: Empirical Findings and Distributional Effects
- Little effect on homeownership rates:
  - Cross-country comparisons: Canada and Australia have similar homeownership rates to the United States without a generous mortgage interest deduction.
  - Intertemporal U.S. comparison: homeownership rate hovering between 63–68 percent for over 50 years despite rising mortgage interest deduction.
  - Gyourko and Sinai (2003): deduction increased by over 112 percent in real terms between 1979 and 1999 while homeownership increased by 70 percent from 40.9 million to 69.7 million.
  - Footnote: The groups on the homeownership margin (the poor and the young) rarely use the deduction even when owners.
- High fiscal cost:
  - Mortgage interest tax deduction costs around 0.7 percent of GDP every year (OMB, 2011).
- Capitalization into prices and increased volatility:
  - Gyourko and Sinai (2003): house prices in certain markets in the west and east are about 20 percent higher on average because housing subsidies are capitalized into property values.
  - Van den Noord (2005): euro area countries with highest subsidies (Netherlands, Ireland, Finland and Spain) also have most volatile house prices.
- Regressivity and unequal geographic distribution:
  - Canner et al. (2002): about 50 percent of households with outstanding mortgages choose to itemize.
  - 80 percent of homeowners with annual incomes above $80,000 and positive mortgage debt choose to itemize.
  - Gyourko and Sinai (2003), using 1990 Census data: a handful of metropolitan areas reap most net benefits; in 2000 California received 18.7 percent of the aggregate subsidy while having 9.4 percent of the nation’s homeowners; New York received 9.5 percent of the aggregate subsidy with 5.3 percent of homeowners.
- Distortionary effects on investment and leverage:
  - Preferential tax treatment encourages households to invest more in housing and less in other assets.
  - Studies (Dunsky and Follain, 2000; Follain and Dunsky, 1997; Follain and Ling, 1991; Ling and McGill, 1998; Hendershott, Pryce, and White 2003) find household leverage highly sensitive to interest deductibility.
  - Follain and Melamed (1998): removal of mortgage interest deduction would reduce mortgage debt by 40 percent; declines skewed to higher incomes: 54 percent at incomes of $55,000 and 69 percent at incomes over $110,000.
  - Estimated increase in tax revenue from removal would be only a quarter to a third of potential because mortgage debt would be run down.

### Financing Side: GSEs, Funding Advantages, and Market Effects
- Role of GSEs:
  - GSEs’ special status (implicit government guarantee and funding advantages) facilitated development of a secondary market for residential mortgage-backed securities and the prevalence of 30-year fixed-rate, no-prepayment-penalty mortgages.
  - GAO (1996, 2009): GSEs enhanced liquidity and reduced regional differences in credit access.
- Measured funding advantage:
  - CBO (2001): overall funding advantage to GSEs about 41 basis points; implicit government guarantee providing advantage for MBS issuances of around 30 bps; just over half of this subsidy (25 basis points) passed to mortgage borrowers.
  - Other studies: housing GSEs have a 25–70 basis points cost advantage (Ambrose and Warga (2002); Nothaft et al. (2002)).
  - Passmore, Sparks, and Ingpen (2002) and McKenzie (2002): conforming loan mortgage interest rates 20–25 basis points lower than without GSE subsidy.
- Risks and market distortions:
  - Lower interest rates due to implicit guarantee may be inefficient, causing over-investment in housing and moral hazard (White (2002); Wallison, Stanton and Ely (2004)).
  - GSEs may have crowded private lenders into peripheral/riskier markets.
  - Private-label MBS issuance exploded between 2004 and 2007, driven by financial innovation, increased investor risk appetite, and lax supervision, focusing on higher-risk market segments (subprime, alt-A, teaser rates).
  - Since crisis onset, U.S. private-label market for MBS remains almost completely shut down.

### Cost of Government Intervention in U.S. Housing Finance (Estimates)
- Treasury/O MB estimates (FY2012 and projections):
  - U.S. Treasury: tax expenditures on housing estimated to cost around $230 billion in FY2012, rising to over $330 billion by FY2016.
- Mortgage-related tax expenditures and cumulative costs:
  - Home mortgage deduction is the most expensive tax expenditure on housing and the second largest forgone revenue in the tax system over FY2012–16:
    - Deductibility of mortgage interest on owner-occupied homes: 2012 = 98.6; 2016 = 143.7; 2012–16 cumulative = 609.2 (Table 4, Billions of U.S. dollars).
    - Table 4 excerpts (Billions of U.S. dollars):
      - 2012 Total Tax Expenditures for Housing: 229.7
      - 2016 Total Tax Expenditures for Housing: 335.1
      - 2012–16 Total Tax Expenditures for Housing: 1,404.8
      - Homeowners 2012: 208.0; 2016: 304.1; 2012–16: 1,272.0
      - Exclusion of net imputed rental income 2012: 50.6; 2016: 75.5; 2012–16: 302.8
      - Deductibility of State and local property tax on owner-occupied home 2012: 24.9; 2016: 31.4; 2012–16: 142.3
      - Capital gains exclusion on home sales 2012: 35.2; 2016: 2.4; 2012–16: 216.8
  - Table 5 (Income Tax Expenditures Ranked by Total, Billions of U.S. dollars):
    - Exclusion of employer contributions for medical insurance premiums and medical care: 2012 = 1,184; 2012–16 = 1,071 (note: table formatting in source).
    - Deductibility of mortgage interest on owner-occupied homes: 2012 = 299; 2012–16 = 609
    - Excl. of net imputed rental income: 2012 = 55; 2012–16 = 303
    - Capital gains exclusion of home sales: 2012 = 123; 2012–16 = 217
- Federal financing programs and subsidies:
  - CBO (2001): Fannie Mae, Freddie Mac and the FHLB system received $13.6 billion in subsidies in the year 2000, mostly from implicit government guarantee on their debt.
  - CBO (2009a): USDA, VA, and Ginnie Mae programs resulted in no significant costs or savings to federal government in 2009; FHA’s MMI program subsidy estimates consistently negative (fee collections exceed net payments on defaults on present value basis).
  - CBO (2009a): insuring more than $300 billion of new mortgages through MMI program in 2009 did not result in savings to the government.

### Cross-Country Comparisons and Alternative Designs
- Canada:
  - Less government intervention than the United States; no housing GSEs; mortgage interest not deductible; lenders have recourse on borrower’s assets and income.
  - Main Canadian tax expenditure: non-taxation of capital gains from sale of principal residence = C$3.9 billion in 2010 (around ¼ of 1 percent of GDP).
  - Two targeted measures for first-time homebuyers: First-Time Home Buyers' Tax Credit (non-refundable tax credit up to C$750; estimated cost around C$145 million in 2010) and Home Buyers’ Plan (withdraw up to C$25,000 from RRSP tax-exempt if repaid within 15 years).
  - Canada Mortgage and Housing Corporation (CMHC): dominant mortgage credit insurer with 100 percent explicit government guaranty through NHA program; at end-2010 CMHC covered 96 percent of securitization funding to residential mortgage credit in Canada.
  - Canada uses NHA MBS and Canada Mortgage Bond (CMB) programs with CMHC timely payment guarantees ultimately backed by Government of Canada.
- OECD heterogeneity:
  - Numerous countries exempt capital gains taxes on principal residences; only a few provide mortgage interest tax deductions, often limited in eligibility or amount.
  - Examples of limits:
    - Germany: mortgage interest deductible only when property is rented.
    - France: deductible for loans extended as of August 2007, limited to maximum annual tax credit per couple of €1,500 and only for five years.
    - Ireland: since May 1 2009, deduction restricted to first seven years; plans to abolish by end-2017.
    - Spain: limited deduction to households with income less than €24,000 since January 2011.
  - Countries without mortgage interest deduction include Canada, the United Kingdom, Australia and New Zealand.
- Other country instruments:
  - Mortgage insurance arrangements vary: Australia (private insurers), Netherlands (public NHG guarantee for loans up to around €350,000 with borrower fee 0.3 percent), Japan (Japan Housing Finance Agency (JHF) guarantees ~25 percent of mortgages).
  - NHG guarantee shifts default risk to government/taxpayers; NHG-guaranteed mortgages carry risk weighting of zero for banks.

### Phasing Reforms: International Experiences and Lessons
- Successful gradual reductions:
  - United Kingdom: limited deductible interest to maximum loan of £30,000 starting 1983; phased down tax rate from 25 percent to 10 percent by 1993; abolished in 2000. Removal did not prevent house prices rising 145 percent from 2000 to 2007 peak.
  - Netherlands: series of measures reducing mortgage interest deductibility including limiting deduction to funds used to purchase/renovate primary residence (2001), limiting duration to 30 years (2001), changes to Eigen Woning Forfait and abolition of maximization leading to reduced deduction for houses above €1.6 million (2010).
  - Ireland: since May 2009 deduction available only for first seven years of mortgage; special provisions for first-time buyers (25 percent tax rate exception for first year; maximums noted).
  - Spain: from January 1 2011 taxpayers earning over €24,107/year no longer enjoy deduction; incomes up to €17,700 retain full deduction (15 percent of annual mortgage interest and principal up to €9,015); linear phase down between €17,700 and €24,107.
  - Australia: privatized HLIC in 1997; government guarantees withdrawn; homeownership rates essentially unchanged; private mortgage insurance market insures 100 percent of mortgage exposure similar to Canada.
- Cautions from Sweden’s experience:
  - Sweden reduced deductible tax rate to 50 percent in 1985 (from 80 percent) without negative impact, but subsequent reduction to 30 percent in 1991 during deep recession coincided with severe housing market collapse (nominal house prices declining by average annual rate of 10¼ percent in 1992–93).
  - Lesson: spread major fiscal reforms over time and time reforms to relatively healthy housing market conditions to avoid disruptive macro-financial effects.

### Policy Options, Recommendations, and Fiscal Implications
- Proposed reform options considered in U.S. policy debates:
  - Bipartisan National Commission on Fiscal Responsibility and Reform (December 2010) proposed:
    - Lower mortgage interest deduction cap from $1 million to $500,000.
    - Restrict deduction only to primary residences.
    - Convert deduction into a 12 percent non-refundable tax credit to expand reach and better target homeownership.
  - FY 2011 Administration proposal: cut deduction rate for itemized expenses for those making more than $250,000 to rate paid by middle class (stalled in Congress).
  - Administration budget proposals: limit tax rate at which high-income taxpayers can take itemized deductions to maximum of 28 percent, affecting married taxpayers with incomes over $250,000 and singles over $200,000 (Office of Budget and Management, 2011).
- Estimated revenue impacts:
  - CBO (2009b): reducing $1 million cap by $100,000 a year beginning in 2013 and ending at $500,000 in 2018 could generate $41.4 billion in additional revenues over 10 years.
  - Converting mortgage interest deduction to a 15 percent tax credit for everyone (with mortgage amount cap) could increase revenues by $387.6 billion over 10 years.
- Recommended approach:
  - Gradual phasing and careful timing of reforms to avoid large disruptions (informed by U.K., Netherlands, Sweden experiences).
  - Over the medium term, downsize GSEs’ role in housing finance, make them fully public and more narrowly focused to better complement private-label markets.
  - Consider replacing costly, regressive tax expenditures with less complex, cheaper systems while protecting labor mobility and avoiding undue distortion in fragile housing markets.

*Source: IMF working paper content provided in the supplied PDF excerpt.*

### References

### _wp11191 - References

### Academic research on housing taxation, mortgage interest, and homeownership
- Aaron, H. J., 1972, Shelter and Subsidies: Who Benefits from Federal Housing Policies? Washington, D.C.: Brookings Institution.
- Capozza, D., R. Green and P. Hendershott, 1996, “Taxes, Mortgage Borrowing, and Residential Land Prices,” in H. Aaron and W. Gale (eds) Economic Effects of Fundamental Tax Reform, pp. 171–210, Washington, D.C.: Brookings Institution.
- Dunsky, R.M. and J.R. Follain, 2000, “Tax Induced Portfolio Reshuffling: The Case of the Mortgage Interest Deduction,” Real Estate Economics, vol. 28, pp. 683–718.
- Follain, J.R., and D. Ling, 1991, “The Federal Tax Subsidy to Housing and the Reduced Value of the Mortgage Interest Deduction,” National Tax Journal, Vol. 44(2), pp. 147–168.
- Poterba, J., 1984, “Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach,” Quarterly Journal of Economics, Vol. 99(4), pp. 729–52.
- Glaeser, E.L. and J. Gyourko, 2008, Rethinking Federal Housing Policy: How to Make Housing Plentiful and Affordable, Washington, D.C.: American Enterprise Institue.
- Rossi, P. and E. Weber, 1996, “The Social Benefits of Homeownership: Empirical Evidence from the National Surveys,” Housing Policy Debate, Vol. 7, pp. 37–81.
- DiPasquale, D. and E.L. Glaeser, 1999, “Incentives and Social Capital: Are Homeowners Better Citizens?,” Journal of Urban Economics, Vol. 45(2), pp. 354–84.

### Empirical studies and analyses of mortgage markets, subprime crisis, and GSEs
- Amromin, G., J. Huang, C. Sialm, and E. Zhong, 2010, “Complex Mortgages,” Federal Reserve Bank of Chicago WP 2010–17, Chicago, IL: Federal Reserve Bank.
- Coleman, M., M. LaCour-Little, and K. Vandell, 2008, “Subprime Lending and the Housing Bubble: TailWags Dog?” Journal of Housing Economics Vol. 17, No. 4, pp. 272–90.
- Dell’Ariccia, G., D. Igan, and L. Laeven, 2008, “Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market,” IMF Working Paper 08/106, (Washington, D.C.: International Monetary Fund).
- Jaffee, D.M., 2008, “The U.S. Subprime Mortgage Crisis: Issues Raised and Lessons Learned,” Prepared for the Commission on Growth and Development and the World Bank, April.
- DeMarco, E.J., 2010, “Current State of the Government Sponsored Enterprises,” Statement Before the U.S. House of Representatives Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, Washington, D.C.: Federal Housing Finance Agency.
- Passmore, W., R. Sparks, and J. Ingpen, 2002, “GSEs, Mortgage Rates, and the Long-Run Effects of Mortgage Securitization,” Journal of Real Estate Finance and Economics, Vol. 25, pp. 215–42.
- Nothaft, F., J. Pearce and S. Stevanovic, 2002, “Debt Spreads Between GSEs and Other Corporations,” Journal of Real Estate Finance and Economics, Vol. 25 (2/3), pp. 151–72.
- Federal Housing Finance Agency, 2010, Conservator’s Report on the Enterprises’ Financial Performance, Third Quarter.

### Policy reports, government analyses, and tax-expenditure documents
- Committee on the Budget, 2008, Tax Expenditures, Compendium of Background Material on Individual Provisions, Washington, D.C.: Congressional Research Service, December.
- Congressional Budget Office, 2009a, “An Overview of Federal Support for Housing,” Economic and Budget Issue Brief, November.
- Congressional Budget Office, 2009b, Budget Options, Vol. 2, August.
- Office of Management and Budget, 2011, Analytical Perspectives, Budget of the United States Government, Fiscal Year 2012.
- Office of Management and Budget, 2010, Analytical Perspectives, Budget of the United States Government, Fiscal Year 2011.
- U.S. Government Accountability Office, 2009, “Fannie Mae and Freddie Mac, Analysis of Options for Revising the Housing Enterprises’ Long-Term Structures,” GAO–09–782 (September), Washington, D.C.
- U.S. Treasury, 2011, “Reforming America’s Housing Finance Market,” A Report to Congress, February.
- President’s Advisory Panel on Federal Tax Reform, 2005, Simple, Fair, and Pro-Growth: Proposals to Fix America’s Tax System, November.
- White House, 2010, The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform, December.

### International comparisons, country studies, and housing finance systems
- European Central Bank, 2009, “Housing Finance in the Euro Area,” Occasional Paper Series No. 101, March.
- Kiff, J., 2009, “Canadian Residential Mortgage Markets: Boring But Effective?,” IMF Working Paper 09/130, (Washington, D.C.: International Monetary Fund).
- Kiff, J., Mennill, and G. Paulin, 2010, “How the Canadian Housing Finance System Performed Through the Credit Crisis: Lessons for Other Markets,” Journal of Structured Finance, Vol. 16, No. 3, pp. 44–64.
- Scanlon, K. and C. Whitehead, 2004, International Trends in Housing Tenure and Mortgage Finance, London: Council of Mortgage Lenders.
- Gibb, K., M. Munro and M. Satsangi, 1999, Housing Finance in the UK: An Introduction, Palgrave Macmillan.
- Yelten, 2006, “House Prices In the Netherlands: Determinants, Concerns, and Considerations Related to Phasing Out the Tax Deductibility of Mortgage Interest Payments,” Kingdom of the Netherlands—Netherlands: Selected Issues, IMF Country Report No. 06/284, (Washington, D.C.: International Monetary Fund).
- Wolswijk, G., 2010, “Fiscal Aspects of Housing in Europe,” in P. Arestis, P. Mooslechner and K. Wagner (eds), Housing Market Challenges in Europe and the United States, Palgrave Macmillan.
- Finance Canada, 2011, Tax Expenditures and Evaluations 2010, Ottawa.
- International Bureau for Fiscal Documentation, 2010, European Tax Handbook 2010: Ireland, IBFD, Amsterdam.

### Mortgage products, servicers, and market functioning studies
- Cordell, L., K. Dynan, A. Lehnert, N. Liang, and E. Mauskopf, 2008, “The Incentives of Mortgage Servicers: Myths and Realities,” Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs 2008–46, Washington, D.C.: Federal Reserve Board.
- Amromin, G., J. Huang, C. Sialm, and E. Zhong, 2010, “Complex Mortgages,” Federal Reserve Bank of Chicago WP 2010–17, Chicago, IL: Federal Reserve Bank.
- Lea, M., 2010, “Alternative Forms of Mortgage Finance: What Can We Learn From Other Countries?” Paper prepared for Harvard Joint Center for Housing Studies National Symposium Moving Forward: The Future of Consumer Credit and Mortgage Finance, Harvard Business School, April.
- LPS Applied Analytics, 2011, Mortgage Monitor, available at: http://www.lpsvcs.com/NEWSROOM/INDUSTRYDATA/Pages/default.aspx

### Additional relevant works on housing, taxation, and macroeconomic links
- Mills, E. S., 1987, “Dividing-up the Investment Pie: Have We Overinvested in Housing?” Business Review, Federal Reserve Bank of Philadelphia.
- Wachter, S. and M. Zandi, 2004, “Housing’s Changing Role in the Business Cycle,” Wharton Real Estate Review (Spring), pp. 63–74.
- Van den Noord, P. (2005), “Tax Incentives and House Price Volatility in the Euro Area: Theory and Evidence,” Économie Internationale, Vol. 101, pp. 29–45.
- Gordon, R.H., J.R. Hines and L.H. Summers, 1987, “Notes on the Tax Treatment of Structures,” NBER Working Paper No. W1896, National Bureau of Economic Research.

*References compiled from the source PDF "_wp11191 - References".*

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