Abstract
Many conservatives want to remove the government's role from the U.S. housing finance system, leaving private markets to meet the mortgage needs of U.S. residential home buyers. Looking at our country’s history and the experience of many other countries starkly illustrate the flaws inherent in this “purely private” approach. As this memo details, a full withdrawal of the federal government from the mortgage markets would lead to radical and catastrophic changes in the U.S. mortgage markets and thus our housing markets, including:• Limited availability of long-term, fixed-rate mortgages• Sharp increases in the cost of mortgages• Large reductions in the availability of mortgage credit• A higher systemic susceptibility to housing bubbles• A lack of mortgage credit during economic downturns
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