Assessing Proposals to Reform America’s Housing Finance System

Nearly a decade after the financial crisis, the housing finance system remains largely structurally unreformed. There have been several legislative pushes for comprehensive reform after American taxpayers provided $187 billion in bailout assistance to Fannie Mae and Freddie Mac (the “GSEs”) and since both GSEs were placed into conservatorship in 2008, though all comprehensive reform efforts to date have failed to be enacted.

USMI firmly believes that reform is necessary to put our housing finance system on a more sustainable path so that creditworthy borrowers will have access to prudent and affordable mortgage credit in the future and so that taxpayers are better shielded from housing related credit risks. For more than 60 years, private mortgage insurance (MI) has played a critical role in providing access to mortgage credit and protecting taxpayers. The 115th Congress and the Trump Administration have a unique opportunity to address this last unfinished reform to truly put America’s housing finance system on a sustainable path. Recently, there have been a number of reform proposals from think tanks, trade associations, and others—each articulating a specific set of principles or visions for the structure of the new future housing finance system, and elements of the transition to a future state.

This paper, Assessing Proposals to Reform America’s Housing Finance System, seeks to analyze various proposals through the lens of USMI’s housing finance reform principles, with particular attention to the role of private capital to protect against taxpayer risk exposure in the proposed future systems. Several thoughtful legislative proposals for housing finance reform exist, but this paper is restricted to analysis of several of the white papers and reform proposals put forward by think tanks and trade associations. Simply returning to the pre-conservatorship status quo does nothing to strengthen the housing finance system, and USMI looks forward to working with industry and consumer groups, Congress, and the Administration to identify the best reforms to put America’s housing finance system on a sustainable path.

USMI appreciates the work the of authors and stakeholders who assembled these proposals, and we look forward to working with policymakers and other stakeholders to advance necessary reforms to enhance our housing finance system.

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