GSE Reform

ABA Position

The Administration and Congress must determine the fate of Fannie Mae and Freddie Mac, the two government sponsored entities that were placed into conservatorship in 2008. Together, the GSEs play an outsize role in the $10 trillion U.S. mortgage market. Because the ongoing conservatorship puts U.S. taxpayers at risk, it is important that a well-reasoned plan for shrinking the GSEs’ outsize role in the housing finance market be developed and that taxpayers’ risks be reduced.

Without reform the threat of future crises and taxpayer-funded bailouts will remain.

ABA believes the government’s role in housing finance must be reduced and limited to ensuring access to the secondary market for lenders of all sizes with loans targeted to low and moderate income borrowers, and to ensure stability and accessibility of the capital markets in the event of a market failure.

The overarching principle should be to give banks of all sizes access to secondary market financing while ensuring that governmental entities do not compete directly with the private market. While the Federal Housing Finance Agency has made strides in reducing taxpayer exposure to the risks taken on by the GSEs, it remains up to the Administration and Congress to develop a consensus on lasting broad reforms. ABA believes policy makers should take further steps to bring private capital back to the secondary mortgage market, and do so in an orderly, transparent manner that does not disrupt markets or increase the cost of homeownership.