The Way Forward: U.S. Residential Mortgage Finance in a Post-GSE World
24 Pages Posted: 10 May 2011
Date Written: March 3, 2011
The “government-sponsored enterprise” (GSE) system of residential mortgage finance is clearly broken. But what will replace it remains an unanswered question. This paper lays out a vision for how private markets would – if given the opportunity – replace the GSEs and provide a fully functioning secondary market for residential mortgages. In the event that the private sector is deemed inadequate for the task, this paper also proposes a “side-by-side” private/government form of mortgage guarantee that would be superior to the “tail risk” or “catastrophe” government insurance proposals that have circulated as alternatives to the GSEs.
Keywords: secondary mortgage market, mortgage-backed securities, mortgage guarantees, fixed rate
JEL Classification: G21, G28
Suggested Citation: Suggested Citation