Noting that transition will take time, Bass and Canter advocate that the greatest chance of success will depend on the development of multiple private-capital based options to provide the broadest and deepest investor base. They note that there is secular demand for income producing assets like first loss mortgage risk from longer-term investors such as pension funds, sovereign wealth funds and insurers with longer-duration liabilities.In conclusion, Bass and Canter emphasize that "quality" of housing finance, or the long-term stability, should not be sacrificed for "quantity," or lower mortgage rates achieved through increased leverage in the system, noting that in the past the result was an unacceptable degree of volatility in home prices. "The process of bringing private capital into the mortgage market will take time," say Bass and Canter. "If these changes are well communicated and the market is structured appropriately, we believe that there is a deep investor base that is ideally positioned to invest in first-loss mortgage risk over the long term."
AllianceBernstein Issues White Paper Proposing Greater Role For Private Capital In The U.S. Mortgage Market
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