• Housing finance reform actions should articulate a clearly-defined government role in the mortgage market that focuses on ensuring uninterrupted liquidity in secondary markets for mortgage-backed securities (MBS) and preserving the TBA market.
• Significant amounts of private capital should stand in front of the taxpayer. At the same time, expectations for private capital should be realistic about its capacity and steps should be taken to increase its capacity.
• We believe a strong regulator combined with an explicit government guarantee provided by Congress, or other means of ample support, is essential to ensure minimal disruption to the mortgage market and continued access to the uniform, national mortgage rate, such as the 30 year-fixed mortgage rate.

It has been over 17 years since Fannie Mae and Freddie Mac, two of the housing Government-Sponsored Enterprises (GSEs)were placed into a federal conservatorship.  These companies were created decades ago to benefit home buyers through (1) their purchase and securitization of mortgage loans and (2) guarantees on the MBS they issue.  They operate alongside a government corporation named Ginnie Mae that guarantees mortgage-backed securities of government-guaranteed loans (e.g., FHA or VA loans).  Together, they finance the vast majority of mortgage lending in the U.S.

The premise that underlies their creation is that an explicit (in the case of Ginnie Mae) or implicit (in the case of the GSEs) government guarantee on mortgage-backed securities will boost the supply of mortgage credit, because these guaranteed MBS are more attractive to investors who buy the MBS they issue.  This, in turn, will help lower the cost of mortgage lending, create national mortgage markets instead of regional ones, and ensure continued availability through good and bad economic times. This theory has been proven correct.

Much has changed over these 17 years of conservatorship – the population of Earth has increased by over 1 billion people, the Philadelphia Eagles have won not one but two Super Bowls, and the first close-up images of Pluto were taken.

One thing that hasn’t changed, however, is the centrality of housing markets to America’s economy – by some estimates, consistently comprising 15-18% of GDP over a long time horizon.  See it here in visual form:

With the change in Presidential Administrations in 2025, there has been a renewed focus on the status of the GSEs and whether or not they could raise money by selling additional stock, or even be released from this long-running conservatorship back into fully-privatized status.  Meetings have been held with stakeholders, thousands of gallons of virtual ink have been spilled all over the internet, hotels and conference venue owners have rejoiced as the GSE reform speaking circuit has restarted its engines, and all involved in the housing policy space have dusted off their mid-2010s work on GSE reform to see what still seems possible.  Despite all of this, there remain a variety of views on what should be done with them.

This blog post is not a step-by-step recipe for action.  After all, there are few issues that are more of a “public policy” question than how housing is made available to citizens, to whom, and at what cost; there are a variety of paths that can be chosen along the road ahead.

At SIFMA, we remain focused on ensuring that the key benefits that securitization markets (especially the TBA market) provide to the housing market are retained though whatever is done by policymakers. The bottom line is that we continue to support responsible finalization of the reforms of the GSEs undertaken over the last 17 years.  See our papers from 2010 here, 2013 here, 2017 here, 2019 here, 2020 here, for example.  SIFMA’s views have remained consistent over the years.

Why is the TBA market so important?

MBS issued by the GSEs attract trillions of dollars of capital from across the globe to the US housing finance system through the TBA market, which ensures access to thirty-year, fixed-rate mortgages nationwide and throughout economic cycles, at lower rates than would otherwise be available. It is the second most liquid bond market in the U.S, trailing only the Treasury bond market. An average of $310 billion of GSE MBS traded on a daily basis in 2024. Without the TBA market, mortgages would be more expensive, and their availability would become fractured regionally.

The TBA market is a uniquely American creation, providing uniquely American benefits.  We are the only country with 30-year fixed rate mortgages to this scale.

 

To sum it up, SIFMA believes that no matter what happens in the future, policymakers should ensure that the great benefits that TBA market ingenuity has provided for over 40 years are not lost.  Accordingly,

• Any legislation or government action should consider and articulate a clearly-defined government role in the mortgage market that focuses on ensuring uninterrupted liquidity in secondary markets for mortgage-backed securities (MBS) and preserving the TBA market. Doing this will simultaneously outline the role of, and provide certainty to, the private sector.
• Significant amounts of private capital should stand in front of the taxpayer. At the same time, expectations for private capital should be realistic about its capacity and steps should be taken to increase its capacity.
• A vibrant non-governmental mortgage securitization market needs to be available to adjust to changes in GSE and/or government footprint. The SEC has started work on this through its concept release on Regulation AB2, with a goal of restarting the moribund registered MBS markets.  While the so-called 144A RMBS market has increased in size, a more vibrant registered MBS market would allow for a broader range of investors to purchase MBS, and would accommodate actions such as thoughtful reconsideration of GSE loan limits, which have risen sharply since 2008 (this could be be accomplished legislatively, given that there is a statutory formula, or through pricing).
• We believe a strong regulator combined with an explicit government guarantee provided by Congress, or other means of ample support, is essential to ensure minimal disruption to the mortgage market and continued access to the uniform, national mortgage rate, such as the 30 year-fixed mortgage rate.

If these things are not done, the risk that the future market will not work like today’s market in terms of pricing, uniformity, availability, and resilience to economic fluctuations increases. The benefits we discuss above could be reduced or lost, which would increase cost burdens for consumers, lenders, and the financial system as a whole.

Author

Chris Killian is Managing Director, Corporate Credit and Securitization for SIFMA.

Related Resource

• Resource

  TBA Market Governance

• Letter

  Risks of Ending GSE Conservatorships