WASHINGTON (CBSDC) — A new federal housing report is calling for the elimination of mortgage lenders Fannie Mae and Freddie Mac.
The Bipartisan Policy Center commission proposes in “Housing America’s Future: New Directions For National Policy” to scale back the federal government’s role in the nation’s housing finance system and have a greater role for the private sector.
“Profound demographic changes are transforming the country and our housing needs. The aging of the Baby Boomers, the formation of new households by millions of young Echo Boomers striking out on their own, and the increasing diversity of the American population will present new challenges and opportunities for housing providers and policy makers,” co-chairs and former Sens. George Mitchell, Kit Bond and Mel Martinez said in a press release.
MoneyWatch reports that the chief recommendation calls for replacing Fannie Mae and Freddie Mac with a government-owned entity called the Public Guarantor, which includes a private secondary market for mortgages.
“It’s not going to be a radical dramatic change,” former Florida Republican Sen. Martinez told MoneyWatch. “”Far more private risk-bearing capital must flow into our nation’s system.”
According to the report, there would be limited catastrophic risk in the Public Guarantor’s role.
“Our new model clearly delineates the respective roles of the government and the private sector, and establishes a clear expectation that private firms suffer the consequences of poor business decisions by losing their capital, with no bailout for private shareholders or bondholders,” the report states, according to MoneyWatch.
The report also calls for the Federal Housing Authority to be reformed after potentially losing billions of dollars for the first time in its history and also establishing a new performance-based system for delivering federal rental assistance.