News & Opinions
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The Future of the Housing Finance System
NAHB / Eye on Housing Blog / March 13, 2014
The future of the housing finance system is a key issue for the housing industry as well as the economic makeup of the middle class, given the importance that housing wealth and access to rental housing plays in our economy. These factors and the policies that shape them are of such significant importance that this topic has been selected as a primary issue for NAHB’s 2014 legislative conference, “Bringing Housing Home,”which takes place March 17-21 as home builders and other members of the residential construction industry meet federal lawmakers. As part of this event, this week we have examined labor issues and housing-related tax policy. In this last post, we examine housing finance.
The housing Government Sponsored Enterprises (GSEs) — Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks) — have been, and remain, critical components of the U.S. housing finance system. They were created by Congress to support mortgage market liquidity and help address affordable housing needs.
With Fannie Mae and Freddie Mac still operating under conservatorship, serious housing finance reform policy discussions are underway in Congress. While many approaches exist that would determine the future of the system, nearly everyone agrees that reform is critical for housing and the economy. NAHB has made recommendations to Congress outlining a plan by which Fannie Mae and Freddie Mac would gradually be phased into a private-sector-oriented system, where the federal government’s role is clear, but its exposure is limited. Federal support should be limited to catastrophic situations where carefully selected levels of private capital and insurance reserves are depleted before any taxpayer funds are employed to shore up the mortgage market.