Five Proposals for a New Housing Finance System in the United States

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The government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac dominated the U.S. mortgage market for almost 40 years. When the U.S. mortgage and housing markets crashed in 2008, however, these two GSEs survived only due to government bailout and conservatorship, and U.S. taxpayers could end up paying as much as $400 billion for rescuing just these two GSEs.

Although the financial crash devastated the GSEs, they and other government entities continued to expand their roles in the U.S. market. During 2009 and 2010, GSEs guaranteed as much as 70 percent of mortgage market activity. Other government programs guaranteed an additional 25 percent.

In light of this dominance, some commentators suggest that a private market for U.S. mortgages is no longer possible. Others argue that heavily subsidized government programs have crowded out private providers, making actual competition impossible. The five papers presented here look beyond the crisis to present various proposals for the long-term reform of the U.S. mortgage market.