New model identifies levers for stability for Fannie Mae and Freddie Mac credit

(Carnegie Mellon University) In a new article, an economist proposes a scenario in which large lenders temporarily boost high-risk activity at the end of a boom. According to her model, lenders with many outstanding mortgages have incentives to extend risky credit to prop up housing prices, which lessens the losses on their outstanding portfolio of mortgages.
Source: EurekAlert! - Social and Behavioral Science - Category: International Medicine & Public Health Source Type: news