Next Steps in the Housing Finance Reform Saga

Penn Public Policy Initiative

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Date Published March 2015
Primary Author Susan Wachter
Other Authors
Theme Regulation and Supervision of Housing Finance Systems, Housing Finance Policy
Country United States


The U.S. government’s open-ended assistance in the housing industry is not a feasible long-term strategy for economic growth, and ending the current conservatorship of Fannie Mae and Freddie Mac is fundamental to any housing finance reform measure. Several points of consensus for reform have emerged, including: preserving the 30-year fixed rate mortgage and the market for mortgage-backed securities (MBS); ordering private capital in a first-loss position with a government guarantee to protect only against catastrophic outcomes; creating a common securitization platform (CSP) to provide transparency and liquidity; and providing for affordable housing directives. New research from the Federal Reserve, which proposes that a catastrophic risk insurance premium be added on top of the other new costs of reform, also demands consideration. This brief breaks down several leading reform proposals and contains an in-depth analysis of the Johnson-Crapo Housing Finance Reform and Taxpayer Protection Act of 2014 and its possible effects on mortgage rates.

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