International conference on collateral risk: Moderating housing cycles and their systemic impact
Cosponsored by the Collateral Risk Network, Robinson College of Business at Georgia State University, and AEI
Video
About This Event

 

Event Summary

The relationship between collateral value and housing cycles has thus far received scant attention from US policymakers. However, the importance of fundamental indicators of value in moderating housing cycles took center stage during AEI's two-day international conference on collateral risk that began on Wednesday.

The first panel examined housing cycles, with Stephen Oliner of AEI presenting the preliminary results from an extensive study on the relationship between house and land prices, suggesting that rising land share presents a clear signal about overvaluation at the submarket level. Shaun Wang of the Geneva Association described the results of research identifying key supply-and-demand factors useful in determining home value.



During the second panel, Robert Avery of the Federal Housing Finance Agency (FHFA) described a new National Mortgage Database that includes loan-level mortgage characteristics and demographic information on borrowers. Jed Kolko of Trulia described a bubble-watch monitor that uses home price-to-income, home price-to-rent, and home price changes to measure fundamental value.



Karl Case, cofounder of the S&P/Case-Shiller Index of Real Estate Prices, gave a luncheon keynote in which he emphasized the relationship between house price and per-capita income as an important factor in evaluating deviations between home prices and fundamental value.

The next panel addressed international approaches to value and risk. Reiner Lux of HypZert presented a methodology for rating property and markets and Andreas Kunert of vdpResearch outlined a transactional database used to develop residential property indexes at Germany's national and micro levels.



Santiago Herreros de Tejada of Sociedad de Tasación discussed the impact government policies had in creating a speculative construction market in Spain, whereas Maurizio d'Amato of Italy's Politecnico di Bari presented on cyclical capitalization methodologies as a means to integrate valuation practice and property market cycles. Finally, Finn Poschmann of the C. D. Howe Institute discussed trends in the Canadian real estate market.

Wednesday's final panel covered countercyclical policies. Scott Smith and Jesse Weiher of the FHFA underscored the need for a rule-based capital adequacy stress test and outlined a countercyclical capital regime based on accumulating sufficient capital during periods when home prices deviate from long-term real price trends. Andreas Lehnert of the Board of Governors of the Federal Reserve System submitted a presentation outlining the history of US cyclical macroprudential policy. Tom O'Grady of Pro Teck Valuation Services then discussed the effect of higher combined loan-to-value ratios on market price volatility.



A second keynote by former chairman of the Federal Deposit Insurance Corporation William Isaac attributed the differences between the recovery following the recession in 1980 and that following the 2006 recession to divergent policy responses.

Thursday's first panel discussed stabilized lending value and countercyclical loan-to-value ratios. Rep. Bill Foster (D-IL) outlined a "feedback loop" approach to dampening housing bubbles through the use of countercyclical combined loan-to-value limits. Ted Durant of the Mortgage Guaranty Insurance Corporation then discussed appropriate equilibrium trends, highlighting the use of income trends as an anchor.



In the next panel, AEI's Edward Pinto compared the practices of the US Department of Veterans Affairs (VA) loan guaranty with those of Federal Housing Administration insurance programs. Mike Frueh of the VA described how the changes implemented by the VA, including a shift from directing to evaluating the work of servicers, have contributed to the success of the VA program.



The final panel debated whether appraisers and appraisals are up to the challenge of assisting in moderating housing cycles. Steve Linville of the National Association of Home Builders concluded that guiding principles need to include shared data and a consideration of all pertinent approaches to value.



Reflecting on the conference as a whole, Wang, Pinto, the Collateral Risk Network's Joan Trice, and AEI's Stephen Oliner encouraged:

•    A continuation of promising research efforts identified at the conference;
•    An expansion of international efforts to share research, knowledge, and data;
•    The development of transparent data sources; and
•    The organization of a pilot valuation project that looks beyond price to address value.

--Lilla Lukacs

Event Description

Though policy responses to and studies about the causes of the US housing crisis abound, the relationship between collateral value and housing cycles has received scant attention. The summer 2013 conference — cosponsored by the Collateral Risk Network, Robinson College of Business at Georgia State University, and AEI — will focus on housing cycles and their domestic and international systemic impact. Experts from the US, Europe, and Canada will address efforts and proposals to moderate housing cycles by using countercyclical lending policies.  

More than 150 people attended last year’s conference. At this year’s conference, Karl Case, cofounder of the S&P/Case-Shiller Index of Real Estate Prices, will give a keynote address and will be designated as a Bowles Distinguished Scholar. A keynote by Bill Isaac, chairman of Fifth-Third Bank and former chairman of the Federal Deposit Insurance Corporation, will conclude the first day of the conference. Overall, you will hear from six panels of experts from academia, the appraisal industry, the financial community, and regulatory bodies.

We welcome you to participate in person or to watch the event live on this page. Full video will be posted within 24 hours.

 

Agenda

Day 1
Wednesday, July 31

7:45 AM
Registration and Breakfast

8:10 AM
Welcoming Remarks:
Edward J. Pinto, AEI
Joan Trice, Collateral Risk Network
Shaun Wang, The Geneva Association

8:30 AM
Panel 1: The historical perspective — two examinations of housing cycles

Presenters:
Stephen D. Oliner, AEI
Shaun Wang, The Geneva Association

Discussants:
Robert Dorsey, FNC Inc.
Norrine Brydon, Marshall & Swift

Moderator:
Edward J. Pinto, AEI

10:15 AM
Break

10:30 AM
Panel 2: Fundamentals of value

Presenters:
Robert Avery, Federal Housing Finance Agency
Jed Kolko, Trulia

Discussants:
Morris Davis, Wisconsin School of Business at the University of Wisconsin–Madison and AEI
Chris Killian, Security Industry and Financial Markets Association
 
Moderator:
Stephen D. Oliner, AEI

12:00 PM
Buffet Lunch and Bowles Distinguished Scholar Designation

Keynote Address:
Karl Case, Wellesley College

1:30 PM
Panel 3: International approaches to value and systemic risk

Presenters:
Maurizio d'Amato, Politecnico di Bari
Santiago Herreros de Tejada, Grupo Sociedad de Tasación
Reiner Lux, HypZert
Finn Poschmann, C.D. Howe Institute

Discussant:
Lance Coyle, Appraisal Institute

Moderator:
Shaun Wang, The Geneva Association

3:05 PM
Break

3:30 PM
Panel 4: Countercyclical policies

Presenters:
Andreas Lehnert, Board of Governors of the Federal Reserve System
Tom O'Grady, Pro Teck Valuation Services
Scott Smith, Federal Housing Finance Agency
Jesse Weiher, Federal Housing Finance Agency

Discussant:
Susan Wachter, Wharton School of Business of the University of Pennsylvania

Moderator:
Edward Pinto, AEI

5:15 PM
Keynote Address

Introduction:
Alex J. Pollock, AEI

Keynote Address:
William Isaac, Former Chairman of the Federal Deposit Insurance Corporation

6:00 PM
Cocktail Reception

7:30 PM
Adjournment

Day 2
Thursday, August 1, 2013

7:45 AM
Registration and Breakfast

8:15 AM
Panel 5: Stabilized lending value and countercyclical LTVs

Presenters:
Ted Durant, Mortgage Guaranty Insurance Corporation
Bill Foster, US House of Representatives (D-IL)

Discussants:
Patrick Sheehy, Lender Processing Services
Joseph Tracy, Federal Reserve Bank of New York

Moderator:
Alex J. Pollock, AEI

9:25 AM
Panel 5A: Best practices: Alignment of incentives

Presenters:
Edward J. Pinto, AEI
Mike Frueh, US Department of Veterans Affairs

Discussant:
James Carr, Center for American Progress

10:20 AM
Break

10:30 AM
Panel 6: Are appraisers and appraisals up to the challenge?

Presenter:
Steve Linville, National Association of Home Builders

Discussants:
John Brenan, Appraisal Foundation
Alan Hummel, Forsythe Appraisal 
Greg Stephens, Metro-West Appraisal Company 

Moderator:
Joan Trice, Collateral Risk Network

12:00 PM
Buffet Lunch and Discussion of Next Steps

1:30 PM
Adjournment

 

Event Contact Information

For more information, please contact Emily Rapp at Emily.Rapp@aei.org, 202.419.5212.

Media Contact Information

For media inquiries, please contact MediaServices@aei.org, 202.862.5829.


 

 

 

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AEI Participants

 

Stephen D.
Oliner
  • Stephen D. Oliner is a resident scholar at the American Enterprise Institute (AEI) and a senior fellow at the University of California, Los Angeles (UCLA) Ziman Center for Real Estate.

    Oliner joined AEI after spending more than 25 years at the Federal Reserve Board. An economist by training, Oliner held a number of high-level positions at the Fed and was closely involved in the Fed's analysis of the US economy and financial markets. Since leaving the Fed, Oliner has become well known for his analysis of US monetary policy and has maintained an active research agenda that focuses on real estate issues and the US economy’s growth potential.  He is coprincipal developer of the AEI Pinto-Oliner Mortgage Risk, Collateral Risk, and Capital Adequacy Indexes.

    Oliner has a Ph.D. and an M.S. in economics from the University of Wisconsin. He received a B.A. in economics from the University of Virginia.

  • Phone: 202.419.5205
    Email: stephen.oliner@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: 202.419.5212
    Email: emily.rapp@aei.org

 

Edward J.
Pinto
  • American Enterprise Institute (AEI) resident fellow Edward J. Pinto is the codirector of AEI’s International Center on Housing Risk. He is currently researching policy options for rebuilding the US housing finance sector and specializes in the effect of government housing policies on mortgages, foreclosures, and on the availability of affordable housing for working-class families. Pinto writes AEI’s monthly Housing Risk Watch, which has replaced AEI’s FHA Watch. Along with AEI resident scholar Stephen Oliner, Pinto is the creator and developer of the AEI Pinto-Oliner Mortgage Risk, Collateral Risk, and Capital Adequacy Indexes.


    An executive vice president and chief credit officer for Fannie Mae until the late 1980s, Pinto has done groundbreaking research on the role of federal housing policy in the 2008 mortgage and financial crisis. Pinto’s work on the Government Mortgage Complex includes seminal research papers submitted to the Financial Crisis Inquiry Commission: “Government Housing Policies in the Lead-up to the Financial Crisis” and “Triggers of the Financial Crisis.” In December 2012, he completed a study of 2.4 million Federal Housing Administration (FHA)–insured loans and found that FHA policies have resulted in a high proportion of working-class families losing their homes.

    Pinto has a J.D. from Indiana University Maurer School of Law and a B.A. from the University of Illinois at Urbana-Champaign.

  • Phone: 240-423-2848
    Email: edward.pinto@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: 202-419-5212
    Email: emily.rapp@aei.org

 

Alex J.
Pollock
  • Alex J. Pollock is a resident fellow at the American Enterprise Institute (AEI), where he studies and writes about housing finance; government-sponsored enterprises, including Fannie Mae, Freddie Mac, and the Federal Home Loan Banks; retirement finance; and banking and central banks. He also works on corporate governance and accounting standards issues.


    Pollock has had a 35-year career in banking and was president and CEO of the Federal Home Loan Bank of Chicago for more than 12 years immediately before joining AEI. A prolific writer, he has written numerous articles on financial systems and is the author of the book “Boom and Bust: Financial Cycles and Human Prosperity” (AEI Press, 2011). He has also created a one-page mortgage form to help borrowers understand their mortgage obligations.


    The lead director of CME Group, Pollock is also a director of the Great Lakes Higher Education Corporation and the chairman of the board of the Great Books Foundation. He is a past president of the International Union for Housing Finance.


    He has an M.P.A. in international relations from Princeton University, an M.A. in philosophy from the University of Chicago, and a B.A. from Williams College.


  • Phone: 202.862.7190
    Email: apollock@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: (202) 419-5212
    Email: emily.rapp@aei.org
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