How to Improve Fannie and Freddie’s Risk-Sharing Effort

Brief

How to Improve Fannie and Freddie’s Risk-Sharing Effort

Abstract

The authors commend the Federal Housing Finance Agency (FHFA) and the government-sponsored enterprises (GSEs) for significant progress on one of the more important policy efforts coming out of the financial crisis. These institutions are making the housing finance system more stable and robust and are laying the groundwork for a better future system. To improve and expand the effort, the authors recommend steps to improve price discovery and broaden participation by various sources of private capital, particularly institution-based capital. They also recommend that FHFA and the GSEs more fully consider the broader implications of their effort, not just to the housing finance system of today, but to the one policymakers will build for tomorrow, and not just to the housing finance system in isolation, but to the larger financial system in which it plays such a critical part.

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