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.

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