Selected Legislative Proposals to Reform the Housing Finance System Page: 4 of 23
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Selected Legislative Proposals to Reform the Housing Finance System
The bursting of the housing bubble in 2007 and the multi-year downturn in the housing and
mortgage markets have led some to question whether the pre-crisis structure of the housing
finance system is appropriate for the future. Many different housing finance reform plans have
subsequently been proposed, and from the debate some broad principles appear to have emerged.
Among those principles are
* Prevent taxpayers from having to provide assistance again in the future.
Fannie Mae and Freddie Mac-two government-sponsored enterprises or
GSEs-experienced significant financial losses when house prices fell and
foreclosure rates increased. The GSEs were placed in conservatorship by their
regulator, the Federal Housing Finance Agency (FHFA), in September 2008.1
Nearly six years later, the GSEs remain in conservatorship and have received
approximately $187 billion in assistance in the form of senior preferred stock
purchased by the Department of the Treasury. Though the GSEs have made
significant dividend payments to the Treasury since entering conservatorship,
none of these payments count toward paying back the amount injected by
Treasury. The dividends compensate Treasury for its assistance and the risk it has
Furthermore, the Federal Housing Administration (FHA), an agency within the
Department of Housing and Urban Development (HUD) that provides federal
mortgage insurance, received $1.7 billion from Treasury at the end of FY2013 to
ensure that it had enough funds on hand to pay for all of the expected future costs
associated with the mortgages that it currently insures.2 These funds were
provided under the permanent and indefinite budget authority provided to all
federal credit programs under the Federal Credit Reform Act of 1990, and the
transfer of funds from Treasury did not require additional congressional action.3
Although FHA does not anticipate needing additional funds from Treasury in
FY2014, concerns persist about its ongoing financial stability.4
* Return private capital to the mortgage market. The increased role of the
federal government in the mortgage market since 2008 is shown in Figure 1. In
addition to Fannie Mae and Freddie Mac, the government guarantees mortgage
loans through FHA, the Department of Veterans Affairs (VA), and the U.S.
Department of Agriculture (USDA). The government guarantees mortgage-
backed securities (MBS) composed of FHA, VA, and USDA mortgages through
Ginnie Mae, an agency within HUD. Since 2008, Ginnie Mae and the GSEs have
1 For more on the financial status of the GSEs, see CRS Report R42760, Fannie Mae's and Freddie Mac's Financial
Status: Frequently Asked Questions, by N. Eric Weiss.
2 In general, FHA is supposed to earn enough money in fees to cover the costs of mortgages that default. However, like
all federal credit programs, FHA has permanent and indefinite budget authority with Treasury to cover higher-than-
expected future costs of loan guarantees.
3 The Federal Credit Reform Act is Title V of the Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) and is
codified at 2 U.S.C. 661 et seq.
4 For more on the financial status of FHA, see CRS Report R42875, FHA Single-Family Mortgage Insurance:
Financial Status of the Mutual Mortgage Insurance Fund (AII Fund), by Katie Jones.
Congressional Research Service
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Hoskins, Sean M.; Weiss, N. E. & Jones, Katie. Selected Legislative Proposals to Reform the Housing Finance System, report, June 11, 2014; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc821545/m1/4/: accessed December 14, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.