Abstract To secure housing loans, French banks do not necessarily ask for a mortgage but rely mainly on the guarantee provided by a residential property loan guarantor. Using an economic capital approach and the data of a major French guarantor over the 1997-2013 periods, this paper illustrates the ability of a guarantee mutual fund to benefit from diversification effects coming from the heterogeneity across participating banks. Thanks to these large diversification benefits, the required deposits of the borrowers amount on average over the period to less than 0.10 percent of the total of their loans to insure the stability of the fund at the one year horizon. During the recent crisis, this percentage rises to 0.20, to be compared to the current charge of 1.5%, of which a part is usually refunded to borrowers when the loan is repaid. These results are evidence of the resilience of the French guarantee system in adverse scenarios. However, analyzing the impact of the 2008 crisis on the required economic capital of the fund also shows that the heterogeneity across banks still exposes the fund to concentration risk, i.e. the risk to observe extreme losses concentrated on a given lender
