The Government Accountability Office has released Housing Finance System: A Framework for Assessing Potential Changes. The GAO writes,
To help policymakers assess various proposals for changing the single-family housing finance system and consider ways in which the system could be made more effective and efficient, we prepared this report under the authority of the Comptroller General. Specifically, this report (1) describes market developments since 2000 that have led to changes in the federal government’s role in single-family housing finance; (2) analyzes whether and how these market developments have challenged the housing finance system; and (3) presents an evaluation framework for assessing potential changes to the housing finance system. (2)
It is useful to have a framework to figure out what kind of housing finance system we want for the 21st century. The GAO’s has 9 elements:
- Clearly defined and prioritized housing finance system goals
- Policies and mechanisms that are aligned with goals and other economic policies
- Adherence to an appropriate financial regulatory framework
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Government entities that have capacity to manage risks
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Mortgage borrowers are protected and barriers to mortgage market access are addressed
- Protection for mortgage securities investors
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Consideration of cyclical nature of housing finance and impact of housing finance on financial stability
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Recognition and control of fiscal exposure and mitigation of moral hazard
- Emphasis on implications of the transition (54-55)
This all sounds very Yoda-like, but the report itself goes into great detail as to what each of these 9 elements means. Given that Congress has left the housing finance system to its own devices, it is helpful that other branches of government like the GAO, Treasury and the FHFA are trying to move us beyond our current state of limbo. We need a housing finance system that is designed to last longer than the Band Aids and duct tape that were applied to it during the financial crisis.
