A new housing finance system for the United States
An Essay in House of Cards: Reforming America's Housing Finance System

Article Highlights

  • Continuing US gov't involvement in the housing finance system will inevitably involve serious losses for the taxpayers

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  • Instead of basing the financing of housing on gov't backing, a robust system can be based on ensuring the quality of mortgages

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  • US #housing finance system could function well without GSEs or any other form of government financial support

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Introduction
Implicit in most of the proposals for reforming the U.S. housing finance system is A new housing finance system for the United States

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 the idea that mortgage- backed securities (MBS) backed by U.S. mortgages cannot be sold unless they are issued by a government sponsored enterprise (GSE) or a U.S. government agency, or are otherwise guaranteed by the U.S. government. In this paper, I endeavor to show that continuing U.S. government involvement in the housing-finance system will inevitably involved serious losses for taxpayers and that the U.S. housing finance system could function well without GSEs or any other form of government financial support simply by ensuring that only good quality mortgages are allowed to enter the securitization system. To demonstrate these points, it is necessary to consider the history of government financial support for housing and the costs of that government involvement. 

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About the Author

 

Peter J.
Wallison

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