Loan insurance helps protect lenders from borrowers defaulting on loans, but it can also affect how easy it is to sell those loans to others. A study found that having loan insurance can lower the standards for giving out loans, but it can also make it easier to sell those loans later on. This trade-off between standards and liquidity in the market means that there is not enough loan insurance being used. The study suggests that by subsidizing loan insurance, regulators can improve the overall welfare in the market. Additionally, while buying loans outright can be an option, the best policy is to provide subsidies for loan insurance.