Policy Brief

Rethinking Homeownership: A Framework for 21st Century Housing Finance Reform

Dissolving Fannie Mae and Freddie Mac

The government-sponsored enterprises (GSE) Fannie Mae and Freddie Mac were significant contributors to the build-up of the housing bubble. Yet, virtually no substantive action has been taken to reform them. This delay, continuing a model that has been proven to be both bad business and problematic for the broader housing sector, is distorting the market and preventing a real recovery in housing. The GSEs must be reformed as soon as possible, as a part of a sweeping overhaul of the housing finance system. The main goal of reform should be remove the government from is role as financer and guarantor of the housing market. This will require a shift away from the mindset that promoting affordable housing is beneficial to individuals and families. With an economy and nation as dynamic as the United States, the government should not try to use policy to try and lower interest rates or encourage people to buy homes instead of doing other things with their money.