Since 1970, housing finance has undergone a radical transformation due to the securitization of mortgage loans. As the market for mortgage securities continues to grow and develop, this transformation raises a number of important public policy issues.

A review of four papers that model market-based (as opposed to regulatory-based) forces driving the asset-backed lending market, revealing that under certain conditions, the information costs that make financial markets important as conduits of credit can also create nonregulatory incentives for...