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Buckley, Karaguishiyeva, Van Order, and Vecvagare analyze the structure of approaches to mortgage credit risk that are now being used in a number of OECD and transition economies. The authors' basic approach is to show how option pricing models can help measure and evaluate the risks of various schemes. They find that * Mortgage default insurance can be a cost-effective tool for both improving housing affordability and efficiently addressing some of the rationing that characterizes this market. When correctly structured, as it is in a number of transition and market countries, this kind of program can be expected to reduce nonprice rationing at an actuarially fair price. At the same time, considerable care must be exercised in the development of such instruments. * Geographical risk diversification, particularly across borders, can play a major role in the success of these programs. Such diversification could be important not only in smaller transition economies but in EU countries as well. This paper--a product of the Urban Unit, Transport and Urban Development Department--is part of a larger effort in the department to study low-income housing.

Mortgage guarantee insurance.

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The goal of this paper is to assess the effectiveness of the policy measures taken by Canadian authorities to address the housing boom. We find that the the last three rounds of macroprudential policies implemented since 2010 were associated with lower mortgage credit growth and house price growth. The international experience suggests that—in addition to tighter loan-to-value limits and shorter amortization periods—lower caps on the debt-to-income ratio and higher risk weights could be effective if the housing boom were to reignite. Over the medium term, the authorities could consider structural measures to further improve the soundness of housing finance.

Housing --- Mortgage guarantee insurance --- Affordable housing --- Homes --- Houses --- Housing needs --- Residences --- Slum clearance --- Urban housing --- City planning --- Dwellings --- Human settlements --- Insurance, Mortgage guaranty --- Insurance --- Prices --- Social aspects --- Infrastructure --- Real Estate --- Industries: Financial Services --- Money and Monetary Policy --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- Urban, Rural, and Regional Economics: Household Analysis: General --- Housing Supply and Markets --- Insurance Companies --- Actuarial Studies --- Economic Development: Urban, Rural, Regional, and Transportation Analysis --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Finance --- Property & real estate --- Insurance & actuarial studies --- Macroeconomics --- Monetary economics --- Loans --- Housing prices --- Financial institutions --- National accounts --- Credit --- Money --- Saving and investment --- Canada