A Realistic Assessment of Housing Finance Reform

Laurie S. Goodman focuses on the conservatorship and reform of Fannie Mae and Freddie Mac and the efforts to expand the role of private capital in such government sponsored enterprises (GSEs). At the federal level, the reform of government-sponsored housing finance entities has dominated efforts to prevent another housing crisis. Goodman presents a realistic assessment of the state of housing finance reform in 2014. She focuses on the conservatorship and reform of Fannie Mae and Freddie Mac and the efforts to expand the role and responsibility of private capital in such government-sponsored enterprises (GSEs). Examining the history of GSEs, Goodman explores the implications of various legislative options and traces the administrative reforms that have been accomplished by the Federal Housing Finance Agency. Six years into this process, she found limited impact of the reforms. In 2014, the federal government essentially still guaranteed 85 percent of new mortgage debt, and credit availability remained extremely limited. Goodman questions whether new mortgage instruments will, or can, emerge to protect customers from undue risk, or whether the housing finance system will evolve to meet the needs of an increasing—and increasingly diverse—population of prospective home owners.

This paper was presented at the Lincoln Institute’s annual Land Policy Conference in 2014 and is Chapter 8 of the book Land and the City.