Where will the Money Come From?

Abstract

A host of extremely critical challenges is facing the housing industry. Inflation and volatile interest rates have seriously disrupted the nation's mortgage finance and delivery system. Sources of funds to the traditional suppliers of mortgage credit have become scarce. The ability of consumers to afford housing has been reduced by escalating prices and declining real incomes. As a result, the mortgage finance industry is in a period of transition to new types of mortgage instruments and new sources of money for mortgages. Among these new sources are the nation's pension funds. Pension funds had been effectively excluded from extensive residential mortgage investments, but new changes in Labor Department Employee Retirement and Income Security Act (ERISA) regulations could open the way for billions of dollars in private pension fund investment in mortgages. Much of this investment will come through an expanded national secondary market with a conventional mortgage-backed security. Mortgage bankers will be in the forefront of these developments.