Housing and the New Financial Mark by Richard L. Florida

Author:Richard L. Florida [Florida, Richard L.]
Language: eng
Format: epub
Tags: Public Policy, City Planning & Urban Development, Political Science, General
ISBN: 9781000677454
Google: 3xOiDwAAQBAJ
Publisher: Routledge
Published: 2019-07-12T09:56:23+00:00

Reprinted with deletions from The Rescue of the Thrift Industry, Washington, D.C.: The Brookings Institution, 1983, by permission of The Brookings Institution.

13

Major Issues for Thrifts in the 1980s

Jack Harris

Introduction

Today, the home finance industry faces major disruption. Economic instability has upset the tidy relationship between mortgage yields and cost of funds, turning the thrift’s traditional asset-liability mismatch into a steady drain on net worth. Deregulation has allowed associations to compete for depositors at the price of more expensive money. Portfolio yields have risen at a painfully slow pace due to an inventory of low-interest loans. These difficulties are reflected in the options available for new buyers: high cost loans and the assumption of additional interest rate risk in the form of adjustable mortgage instruments. Consequently, homeownership is becoming difficult for many. Much has been written on the plight of housing finance. The outlook for the future ranges from optimism for the challenges which lie ahead to guarded pessimism toward a continuation of recent trends. The purpose of this article is to examine the major questions to be resolved in the industry’s future. Accordingly, the discussion will examine five basic issues, which are: (1) what will the association of the future look like; (2) how will the problems emanating from the policy of borrowing short and lending long be resolved; (3) what will be the sources of funds for home financing in the future; (4) what form will the mortgage instrument of the future take; and (5) will savings and loans continue as the primary source for home finance?

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