Shortly after the financial crisis and early in the GSEs’ conservatorship, there were extensive discussions in Washington about winding down and replacing the two mortgage agencies. Alternatives ranged from a government-owned utility to an industry cooperative to authorizing banks to become “mini GSEs.” The word “toxic” in reference to the GSEs’ standing was often heard in these conversations.  Today, that view has all but disappeared. There is no agreement on when or how to move the agencies from conservatorship. There is, however, a nearly universal recognition that they form the cornerstone of the mortgage finance system and must be preserved. In terms of advocacy, much of the impetus for preserving the two agencies initiated with small mortgage originators who were nervous about a wholesale reform of the mortgage liquidity system A “
Housing Reform Outline
” published in early 2019 by Senate Banking Committee Chairman Mike Crapo (R-ID)  introduced strategies to maintain the GSEs and general approaches to GSE reform and became the final nail in the “wind down” coffin. Crapo’s outline became the basis for the
Trump administration’s housing reform blueprint
with the main difference being that the administration abandoned Crapo’s requirement that the legacy GSEs would need to reduce their market share to make room for new entrants. The Trump approach anticipates but does not require that other private mortgage guarantors enter the market. It is possible but unlikely that Congress could take up the GSE and mortgage reform issue in 2020. The only serious movement we are likely to see on GSE reform in the near term will be initiatives that the administration can undertake on its own without the need for legislation.
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