GSE Reform

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Consumer Costs in a Reformed System

In evaluating any proposal for GSE reform, three major objectives must be balanced: protecting taxpayers, attracting capital to Guarantors, and ensuring consumers and borrowers have access to affordable financing. MBA's proposal carefully considers each of these priorities, and achieves such a balance. 

Read our paper that expands upon the discussion of consumer costs in MBA's proposal.

Cost to Consumers Paper

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MBA President & CEO Robert D. Broeksmit, CMB Testimony to Senate Banking Committee on Housing Reform Outline

Conservatorship of the Enterprises has already persisted far longer than intended. The U.S. Congress should not allow conservatorship to continue indefinitely, as market participants will suffer in a number of ways. Borrowers will be denied the benefits of a more vibrant secondary market, lenders will face increased uncertainty about the future, and private-label security (PLS) issuers and investors will hesitate to fully engage in the market. In short, the status quo is an unacceptable long-term outcome. 

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Creating a Sustainable, More Vibrant Secondary Mortgage Market

This white paper presents MBA's recommended approach to GSE reform, the last piece of unfinished business from the 2008 financial crisis. It outlines the key principles and guardrails that should guide the reform effort and provides a detailed picture of a new secondary-market end state. It also attempts to shed light on two critical areas that have tested past reform efforts - the appropriate transition to the post-GSE system and the role of the secondary market in advancing an affordable housing strategy. GSE reform holds the potential to help stabilize the housing market for decades to come. The time to take action is now.

MBA believes that the mortgage market and consumers benefit from a larger and diverse base of lenders. Smaller lenders, in particular, play a key role in strengthening the system for consumers by focusing on niche markets and leveraging unique knowledge of local consumer needs.

Over the last five years, small lenders have secured a number of important wins in their fight to gain equal access to the secondary mortgage market. Only through Congressional reform can we lock in positive gains including:

  • Leveling guarantee fees
  • Preventing special deals for specific lenders
  • Creating a single security

Recapitalization of the GSEs, without reform, puts all these gains at risk. Read our plan to see how we ensure smaller lenders maintain equitable access to the secondary market.

Key Principles

  • Preserve what works:  30-year fixed rate single-family mortgage, TBA market, and long-term multifamily financing options
  • Minimize transition risks to avoid market disruptions
  • Leverage competition and existing infrastructure
  • Ensure liquidity through all economic cycles
  • Explicit guarantee of eligible single-family and multifamily MBS only
  • Increased levels of private first loss capital ahead of government
  • Strong capital supervision and regulation of activities
  • Promote competitive primary market for lenders of all sizes/models


  • New system must work within certain guardrails and protections intended to address  risks to taxpayers, consumers and stability of the housing finance system:
    • Structural requirements to govern the framework for the new system
    • Prudential standards that protect taxpayers
    • Market conduct regulations that maintain transparency and ensure a level playing field for market participants

GSE Reform End State

At outset: Congress enacts legislation that specifies end state and outlines transition process. 

Phase 1: Preparation planning, regulations, creation of Mortgage Insurance Fund, Common Securitization Platform transition, Single MBS for Single Family, formation of new entity structures, technology readiness, acceptance of new entrant applications.

Phase 2: Implementation transfer of GSE assets; regulatory chartering of Guarantors; wind down of GSEs; start-up and operation of SF and MF Guarantors, including issuance of MBS backed by MIF; build-up of Guarantors' capital base; action on new entrant applications.

Phase 3: Divestiture: Government sale of its interests in the Guarantors to private investors, and continued regulation and operation of Guarantors under new framework.

Housing finance system should meet the need of the full continuum of households.

GSE Reform Continuum

Ultimately, GSE reform holds promise to create a more vibrant and sustainable housing finance system that can enhance the lives of millions of Americans and help stabilize the housing market for decades to come. The hard work of reform should proceed without delay.