In the US : “Republicans in Congress and the Obama administration have vowed to get the government out of the mortgage business, letting the private market take over Fannie and Freddie’s functions of supporting the market for home loans. But lenders and consumer advocates say any privatizations could disrupt lending, making matters worse and outweighing the protections they were designed to offer.”
This is the crux of the balancing act required to keep the housing market fluid and bouyant in the US. The housing market is so crucial because :
1. People need places to live.
2. It is a huge economic driver
3. There needs to be new housing stock created ( population is growing and moving significantly to the urban centers ) not just resell of existing stock.
4. This is a significant part of the financial sector as well and needs liquidity .
5. The need to offset lender risk needs to be balanced with the need to ensure that buyers dont have to wait excessively to build up downpayments all the while not shifting all the risk to the Federal Government .
“The initial proposals on “risk retention” by sellers of mortgage-backed securities are likely to have limited effect, largely because Congress provided an exemption for loans that are sold to the Federal Housing Administration and Ginnie Mae, the Government National Mortgage Association. Regulators want to extend that exemption to Fannie Mae and Freddie Mac. Those and other government-sponsored housing finance enterprises currently purchase about 90 percent of new mortgage loans made today.”