The U.S. needs an entirely new system of housing finance to better meet the needs of the most vulnerable households and support the economic recovery, said a Washington think tank that promotes bipartisan political solutions on Monday.
After examining the key issues in U.S. housing over the past 16 months, the Bipartisan Policy Center's (BPC) Housing Commission unveiled a new blueprint that called for winding down the taxpayer- backed mortgage giants, Fannie Mae and Freddie Mac, and expanding the role of private sector in the housing finance reform.
In the report entitled Housing America's Future: New Directions for National Policy, the commission proposed to replace Fannie Mae and Freddie Mac with a new government entity, the "Public Guarantor", which would provide a limited government guarantee for catastrophic risk for certain mortgage-backed securities, after a multiyear transition period.
"The business model of these government-sponsored enterprises ( GSEs) publicly traded companies with implied government guarantees and other advantages has failed and should not be repeated," the report noted.
Fannie Mae and Freddie Mac failed in 2008 and were taken over by the U.S. Treasury Department to continue supporting the 10 trillion U.S. dollars mortgage market.
The plan called for a far greater role of private sector in housing finance, saying "reducing the government footprint and encouraging greater participation by risk-bearing private capital will protect taxpayers while providing for a greater diversity of funding sources."
At present, the U.S. government supports more than 90 percent of single-family mortgages through entities such as Fannie Mae, Freddie Mac, Ginnie Mae, and the Federal Housing Administration as well as roughly 65 percent of the rental mortgage market.
The Obama Administration delivered a report to Congress that reform the U.S. housing finance market on Feb. 11, 2011, but made little progress in the past two years. Analysts believed this new proposal would trigger a national debate and help build a political consensus to move forward with housing finance reform.
"At this critical time in our nation's history, we can no longer afford to defer bipartisan action on housing," said the co- chairs of the BPC's Housing Commission in an op-ed on the U.S. famous website Politico Monday. "We believe our report can serve as a framework for Congress and the administration to act in the best interests of all Americans."
