A white paper by analysts at the American Enterprise Institute for Public Policy Research suggests that securitizations could be safer—and therefore more attractive to institutional investors—if they are limited to only prime-quality mortgages, which generally have low delinquency default rates. The paper recommends alternatives to Fannie Mae and Freddie Mac, and discards the old notion that investors will buy mortgage-backed securities only if they are guaranteed by the government. The authors point out that such MBS have resulted in two massive taxpayer-funded bailouts.

Click here to read the release from the American Enterprise Institute for Public Policy Research.