NCPA - National Center for Policy Analysis

Basic Principles for Future Housing Finance Market

April 6, 2011

The U.S. housing finance market of the future should be governed by four basic principles, say Peter J. Wallison and Alex J. Pollock, resident fellows, and Edward Pinto, the Walter Berns fellow in Financial Policy Studies, at the American Enterprise Institute.

  • The housing finance market -- like other U.S. industries and housing finance systems in most other developed countries -- can and should principally function without any direct government financial support.
  • Ensuring mortgage quality, and fostering the accumulation of adequate capital behind housing risk, can create a robust housing investment market without a government guarantee, based on the fact that high-quality mortgages are good investments and have a long history of minimal losses.
  • All programs for assisting low-income families to become homeowners should be on-budget and should limit risks to both homeowners and taxpayers.
  • Fannie Mae and Freddie Mac should be eliminated as government-sponsored enterprises over time.

Source: Peter J. Wallison, Edward Pinto and Alex J. Pollock, "Principles for Reforming the Housing Finance Market," American Enterprise Institute, April 4, 2011.

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