Working Paper: NBER ID: w17685
Authors: Dwight Jaffee; John M. Quigley
Abstract: This paper analyzes options for reforming the U.S. housing finance system in view of the failure of Fannie Mae and Freddie Mac as government sponsored enterprises (GSEs). The options considered include GSE reform, a range of possible new governmental mortgage guarantee plans, and greater reliance on private mortgage markets. The analysis also considers the likely consequences of adopting alternative roles for government in the U.S. housing and mortgage markets. We start by reviewing the history of the GSEs and their contributions to the operation of U.S. housing and mortgage markets, including the actions that led to their failure in conjunction with the recent mortgage market crisis. The reform options we consider include those proposed in a 2011 U.S. Treasury White Paper, plans for new government mortgage guarantees from various researchers and organizations, and the evidence from Western European countries for the efficacy of private mortgages markets.
Keywords: government sponsored enterprises; housing finance; mortgage market; Fannie Mae; Freddie Mac
JEL Codes: G01; G2; G28; H81; R21; R3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| GSEs (H81) | risky lending practices (G21) |
| risky lending practices (G21) | systemic risk in the housing market (E44) |
| GSEs (H81) | dominance in MBS market (G21) |
| dominance in MBS market (E44) | crowding out private sector activity (E62) |
| GSEs (H81) | minimal contribution to mortgage market stability (G21) |