A week ago Treasury released Reforming America’s Housing Finance Market, a report to Congress about the future of the GSEs and the housing market. In addition to creating a roadmap for winding down Fannie Mae and Freddie Mac, the plan outlined three approaches to the future of the housing market:
Option 1: Privatized system of housing finance with the government insurance role limited to FHA, USDA and Department of Veterans’ Affairs’ assistance for narrowly targeted groups of borrowers.
Option 2: Privatized system of housing finance with assistance from FHA, USDA and Department of Veterans’ Affairs for narrowly targeted groups of borrowers and a guarantee mechanism to scale up during times of crisis.
Option 3: Privatized system of housing finance with FHA, USDA and Department of Veterans’ Affairs assistance for low- and moderate-income borrowers and catastrophic reinsurance behind significant private capital.
All of these options have strengths and weaknesses. In order to get a better sense of them, I asked two housing policy wonks to explain their approaches and answer some questions.
To discuss Option 1, we have Chris Papagianis, Managing Director of e21, a think tank that aims “to advance free enterprise, fiscal discipline, economic growth, and the rule of law.” Here is his testimony on housing finance before the Committee on financial services, and here are things he has written on housing policy debate and GSE reform.
To discuss Option 3, we have David Min, Associate Director for Financial Markets Policy at Center for American Progress, a think tank “dedicated to improving the lives of Americans through progressive ideas and action.” Min has written many articles and research papers for the Center for American Progress, including papers on the advantages of the 30-year fixed rate mortgage and Canada’s mortgage market. He is a member of their Mortgage Finance Working Group, which has a plan for the future of the housing market titled “A Responsible Market for Housing Finance.”
You can read Chris Papagianis contribution here.
You can read David Min’s contribution here.