Abstract
Fannie Mae and Freddie Mac, the two large government-sponsored enterprises (GSEs) that are at the center of US residential mortgage finance, are “elephants in the room” that are being ignored as part of broad-brush financial sector reform. Neither the Dodd–Frank Act nor recently proposed overhauls of Dodd–Frank have addressed reform of the GSEs’ structures, although the GSEs were placed in government conservatorships in early September 2008 and have remained in that state since then. In this article, we review what the GSEs do and how they got themselves into financial difficulties, and we provide an overview of some of the major proposals for reforming the US residential mortgage finance system. We conclude with our own ideas and suggestions for how housing finance, as well as housing policy more generally, should be reformed.
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