We analyze the removal of the credit-risk guarantees provided by the government-sponsored enterprises (GSEs) in a model with agents heterogeneous in income and house price risk. We find that wealth inequality increases, driven by higher mortgage spreads and housing rents. Housing holdings become...

We use the new market for Credit Risk Transfers (CRTs) and the landfall of two major hurricanes to study both how markets price default risk from natural disasters, and how U.S. mortgage rates would change in absence of government-backed guarantees. First, we exploit that CRTs differ in the...