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  • 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…

  • Issue Brief posted December 5, 2013 by James Sherk, John L. Ligon Unprecedented Minimum-Wage Hike Would Hurt Jobs and the Economy

    President Obama and some Senators have proposed increasing the federal minimum wage to $10.10 per hour over the next two years—its highest level ever, after accounting for inflation. The proposed increase far outstrips the productivity growth of minimum-wage workers and would force employers to curtail hiring. Some proponents of the increase theorize that increased…

  • Commentary posted November 20, 2013 by Norbert J. Michel, Ph.D., John L. Ligon Why are Fannie and Freddie funding advocacy?

    Fannie Mae and Freddie Mac have been in federal conservatorship since 2008. Should these government-sponsored housing enterprises — essentially broke — still be required to spend taxpayer money to fund activities of housing advocacy groups? Five years ago, Congress left this question unanswered, but Ed DeMarco, the acting head of the enterprises’ regulator, took the…

  • Issue Brief posted November 12, 2013 by Norbert J. Michel, Ph.D., John L. Ligon GSE Reform: Affordable Housing Goals and the “Duty” to Provide Mortgage Financing

    As Congress considers legislation to eliminate the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, advocacy groups are pressuring financial institutions to adhere to a “duty to serve” their markets rather than to meet specific affordable housing goals. The “duty to serve” is a nebulous concept that codifies the idea that the GSEs (and lenders) have a…

  • Issue Brief posted November 7, 2013 by Norbert J. Michel, Ph.D., John L. Ligon GSE Reform: Trust Funds or Slush Funds?

    Should Fannie Mae and Freddie Mac—the two government-sponsored housing enterprises (GSEs) in federal conservatorship since 2008—be required to use taxpayer money to fund housing advocacy groups’ activities? Five years ago, Congress answered “yes” to this question. The requirement has been in limbo since the GSEs collapsed, but that is only because Ed DeMarco, the acting…

  • Backgrounder posted November 7, 2013 by Norbert J. Michel, Ph.D., John L. Ligon Fannie and Freddie: What Record of Success?

    The fact that Fannie Mae has been around since the 1930s has led some to suggest the U.S. housing system functioned beautifully until the recent crisis. One policy analyst recently stated that under the system of government-sponsored enterprises (GSEs), “Mortgage credit was continuously available well into the late-1990s under terms and at prices that put sustainable…

  • Issue Brief posted July 22, 2013 by John L. Ligon Hensarling Housing Finance Plan: A Welcome Step Toward Solving the Fannie and Freddie Mess

    Representative Jeb Hensarling (R–TX) has released a discussion draft of a proposal, known as the Protecting American Taxpayers and Homeowners (PATH) Act, that would wind down the federally sponsored housing finance agencies Fannie Mae and Freddie Mac and move the U.S. toward a housing finance system that protects both taxpayers and homeowners. The draft is a marked…

  • Issue Brief posted June 6, 2013 by John L. Ligon Will FHA Require the Next Round of Housing Bailouts from the Taxpayer?

    The conventional mortgage market has tightened lending standards in the past few years and, consequently, witnessed a decline in delinquency rates with fairly clear lines in credit quality of borrowers and reasonable requirements on borrower collateral (generally a 20 percent down payment to avoid private mortgage insurance) for loan approval. The Federal Housing…