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Affordable Rent and Access to Homeownership: Refreshing the Debate in the Context of Housing Finance Reform

May 30, 2017

Michael Bright and Ed DeMarco

The continuing policy debate over restructuring the plumbing of the secondary mortgage market may ultimately prove to be the easy part—at least politically—of housing finance reform. The past eight years of proposals and counterproposals have focused the range of outcomes increasingly within a fairly narrow band—more private capital, a mortgage-backed security (MBS) explicitly guaranteed by the government, the elimination of the government-sponsored enterprise (GSE) duopoly, and flawed ownership model all being consistent themes. The proposal we put forward last year favored leveraging a single government MBS—the Ginnie Mae security—coupled with a well-regulated and competitive market for credit enhancement.

Arguably, though, the more important part of reform—the part still in need of fresh thinking—is whether and how to produce broader and more sustainable access to credit for first-time home buyers and low- and moderate-income Americans as well as how to increase the supply of affordable rental housing. All of this is a vital part of ensuring that reform creates a system that can meet the needs of an evolving 21st century American economy. And after all, if Washington is going to engage in a financial restructuring exercise, the focus should be on improving the lives of current and future generations of Americans.