Reforming Our Housing Finance System

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It’s been almost five years since the bank bailouts and the federal takeover of mortgage giants Fannie Mae and Freddie Mac. Yet we are still far from determining what our future housing finance system will look like.

In the absence of reform, the federal government has been backing about 90 percent of new mortgages—a far-larger share than is historically normal, or than most observers think is sustainable. Meanwhile, private capital has shown little appetite in purchasing mortgages without a government guarantee, and it remains difficult for all but the most pristine borrowers to obtain credit to buy a home.

Since the start of the housing crisis, dozens of lawmakers, advocacy groups, academics, and industry stakeholders have offered visions of what our mortgage market should look like. In that time, we’ve seen a bipartisan consensus develop around increasing private capital’s presence in the market while maintaining explicit government support for the segment of the market traditionally served by Fannie and Freddie. But details of any future housing finance system must still be worked out, and Congress has only begun debating legislation to reform the system.

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