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  • Commentary posted November 3, 2016 by John L. Ligon Why Mortgage Principal Forgiveness Policy Is a Bad Idea

    There’s nothing like a “good crisis” to give the federal government an opening to spread its tentacles further into private markets. Just look at the vast growth of federal housing programs since the 2007-2009 financial crisis. Fannie Mae and Freddie Mac alone have added two housing slush funds on top of more nebulous regulatory requirements such as a “duty to serve”…

  • Issue Brief posted August 1, 2016 by John L. Ligon Mortgage Principal Forgiveness Policy Is a Bad Idea

    The Federal Housing Finance Agency (FHFA) continues to pivot on mortgage principal forgiveness policy, initiating a new program that would subsidize a permanent reduction of a portion of unpaid mortgage principal owed by homeowners. The mortgage principal forgiveness program would give preference to some homeowners already in the Fannie Mae-guaranteed and Freddie…

  • Commentary posted April 12, 2016 by John L. Ligon USDA's Rural Housing Service Should Be Plowed Under

    Among the many federal agencies with an “affordable housing” mission is the Agriculture Department’s Rural Housing Service (RHS). It was established in 1949 to provide housing assistance to poor farmers and farm workers. But what is a federal agency without mission creep? By 1961, RHS expanded its portfolio to include direct mortgage loans to individuals residing on…

  • Backgrounder posted March 23, 2016 by John L. Ligon Time to Shut Down the USDA’s Rural Housing Service

    The Rural Housing Service (RHS) of the U.S. Department of Agriculture (USDA) is an unnecessary artifact—part of the post–New Deal vision of federal government housing policy. At the RHS’s inception in 1949, the agency was primarily focused on providing rural-development support to farmers and laborers. Today, however, the RHS specifically targets “underserved” rural areas…

  • Backgrounder posted May 11, 2015 by John L. Ligon, Norbert J. Michel, Ph.D. The Federal Housing Administration: What Record of Success?

    More than 80 years ago, Congress passed a series of laws that significantly expanded the federal government’s presence in the housing finance system. These federal programs have grown and contributed to an explosion of mortgage debt over the past few decades. Homeownership rates, however, have barely changed since the late 1960s. The long-term increase in mortgage debt…

  • Backgrounder posted September 23, 2014 by John L. Ligon, Rachel Greszler, Patrick Tyrrell The Economic and Fiscal Effects of Eliminating the Federal Death Tax

    The federal estate tax (often referred to as the death tax) is a tax on a person’s lifetime accumulated property. In 2014, the death tax applies a 40 percent tax to all accumulated wealth above $5.34 million.[1] While the death tax applies to relatively few Americans and raises only tiny amounts of revenue for the federal government, it imposes substantial costs on the…

  • Issue Brief posted August 11, 2014 by Norbert J. Michel, Ph.D., John L. Ligon Five Guiding Principles for Housing Finance Policy: A Free-Market Vision

    The two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, remain under government conservatorship with the federal government standing behind all of their obligations. Housing finance reform is likely to be addressed during the next congressional session, but it appears the House and the Senate may offer very different reform proposals. Congress…

  • Backgrounder posted June 18, 2014 by John L. Ligon, Norbert Michel Why Is Federal Housing Policy Fixated on 30-Year Fixed-Rate Mortgages?

    Robust mortgage financing exists in virtually every developed nation in the world without the degree of government involvement found in the U.S. While the U.S. homeownership rate is about average among developed nations, U.S. citizens typically pay among the highest interest rates in the industrialized world. Still, many groups argue that eliminating the…

  • Backgrounder posted April 23, 2014 by Norbert J. Michel, Ph.D., John L. Ligon Basel III Capital Standards Do Not Reduce the Too-Big-to-Fail Problem

    Many experts recognize that the government will still step in to support some financial institutions rather than allow them to go through bankruptcy. This “too-big-to-fail” doctrine remains at least as prominent now—and as costly to taxpayers—as it was prior to the 2008 crisis, partly because the Dodd–Frank bill exacerbated the problem. For instance, in the…

  • Issue Brief posted April 18, 2014 by John L. Ligon, Norbert J. Michel, Ph.D. Fannie and Freddie 2.0: The Senate Does Not Get the Government Out of the Market

    In an effort to reform the nation’s housing finance system, Senate Banking Committee Chairman Tim Johnson (D–SD) and ranking member Mike Crapo (R–ID) have announced that they will hold a markup for their bill on April 29, but many details still have to be ironed out. Given that close to 100 percent of the U.S. mortgage market is now backed by the federal government, it…

  • Issue Brief posted April 3, 2014 by Norbert J. Michel, Ph.D., John L. Ligon U.S. Financial Markets Do Not Need a New Regulator: Senate Misses the Mark

    Senators Tim Johnson (D–SD) and Mike Crapo (R–ID) have released a new housing finance reform bill, and as expected, it is very similar to the bill that Senators Bob Corker (R–TN) and Mark Warner (D–VA) released last June. Both Senate proposals would wind down the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, and both would replace the GSEs with a new…

  • Issue Brief posted March 27, 2014 by Norbert J. Michel, Ph.D., John L. Ligon Johnson–Crapo Housing Finance Reform Misguided

    Senators Tim Johnson (D–SD) and Mike Crapo (R–ID) have released a new housing finance reform bill, and as expected, it is very similar to the bill that Senators Bob Corker (R–TN) and Mark Warner (D–VA) released last June. Both Senate proposals would wind down the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, but both would also replace the GSEs…

  • Issue Brief posted February 28, 2014 by Rea S. Hederman, Jr., Rachel Greszler, John L. Ligon Chairman Camp’s Tax Reform Plan a Milestone for Dynamic Analysis

    House Ways and Means Committee chairman Dave Camp (R–MI) released a plan for comprehensive tax reform. Setting aside its merits, Camp’s proposal is noteworthy on two accounts: (1) It presents the most comprehensive tax reform proposal in decades, and (2) it includes a dynamic estimate from the Joint Committee on Taxation (JCT). The latter is a long overdue and welcome…

  • Backgrounder posted February 7, 2014 by John L. Ligon, Norbert J. Michel, Ph.D. GSE Reform: The Economic Effects of Eliminating a Government Guarantee in Housing Finance

    The U.S. government was barely involved in the housing finance market before the Great Depression. Subsequently, the Federal National Mortgage Association (commonly known as Fannie Mae) and the Federal Housing Administration (FHA) attained an almost legendary status for having “saved” the housing market in the 1930s with various forms of government guarantees. The…

  • Issue Brief posted December 17, 2013 by John L. Ligon, Norbert J. Michel, Ph.D., Filip Jolevski GSE Reform: FHFA Should Not Pursue Mortgage Principal Reduction Alternatives

    Should the Federal Housing Finance Agency (FHFA) expand home mortgage modification policy to include principal reduction alternatives (PRAs)? For the past five years, the FHFA has maintained a consistent stance that implementing a PRA policy would come at a high cost to taxpayers with little benefit overall to homeowners. On the other hand, the Federal Housing…