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February 11, 2019

A New Vision for Housing Finance Reform

DS News--Radhika Ojha

A decade after Fannie Mae and Freddie Mac were put under the conservatorship of the Federal Housing Finance Agency (FHFA), the voices for housing finance reform are getting louder.

While Sen. Mike Crapo released an outline of what housing finance reform should look like last week, the National Association of Realtors (NAR) collaborated with Susan Wachter, the Albert Sussman Professor of Real Estate Finance at The Wharton School of the University of Pennsylvania, and Richard Cooperstein, Head of Risk Management at Andrew Davidson and Company, Inc. on  new research that explores the ideal restructuring of the secondary mortgage market.

The research was released as a working paper by NAR recently and proposed a "redesigned alternative based on economic principles and national objectives." It explained why housing finance markets differ from purely competitive markets but are similar to those for public utilities, thus informing the "nature of reform needed to ensure financial stability going forward."

The working paper touched upon six key initiatives that could be implemented to realize the vision of holistic housing finance reform. They included:

The research revealed that the vision of a reformed housing finance market first recognized the critical role of the government-sponsored enterprises in housing finance, which was the same need that led to their initial creation. It also built on the transformed enterprises following conservatorship and codified a structure that was "effective, resilient, and fair, balancing the tension of private operating companies with the public mission."

Click here to read the full working paper.

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