The Future of U.S. Housing Finance:
Five Points of View

Abstract

Recently, the federal government, industry associations, and research and policy organizations have been analyzing strengths and weaknesses of the previous U.S. housing finance system, the housing-related causes of the financial crisis, the failure of Fannie Mae and Freddie Mac, and the current market structure so as to recommend ways the housing finance system might be changed in the future. This article presents five points of view on the future structure of housing finance from leading experts. Two of the co-author teams recommend a private model, and three recommend a public–private model. Two of those recommending a public– private model recommend private mortgage insurers with a government backstop to guarantee mortgage-backed securities but not the insurers; the third envisions private mortgage insurers backed up by contracts similar to credit default swaps for mortgage credit risk, managed by a government-owned clearing house. Four would essentially eliminate the GSEs as we know them today, while one would retain a lot of the GSEs’ infrastructure for the securitization process. All five, explicitly or by implication, would place low-income home ownership programs on the government budget in the FHA or another government entity; one of the five would fund some of those programs through a market access fund.