Paper for a conference sponsored by the Federal Reserve Bank of New York entitled Financial Innovation and Monetary Transmission

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.

Recent evidence shows that homeownership rates among young households have declined substantially since the mid 1980s. Although factors such as late household formation and the increasing user cost of housing are contributing factors, reduced affordability is also a concern. Aggregate data...