Federal Credit and Insurance Programs: Housing

John M. Quigley, University of California, Berkeley

Abstract

This paper reviews the evolution of the major credit and insurance programs undertaken by the US government in support of urban housing. As the review makes clear, the FHA, VA, FNMA, and FHLMC have played major roles in the development of liberal and efficient primary and secondary mortgage markets in the US. The development of capacity in mortgage lending and securitization in the private sector does suggest, however, that federally subsidizing mortgage market activities can be restrained with little effect upon homeownership, the principal rationale for federal activity. In particular, the orderly reduction in the mortgage investment activities of the GSEs and the imposition of guarantee fees upon MBS insured by the GSEs are first steps in restraining federal activity. More generally, a concentration of FHA and GSE activity on first-time homebuyers would reduce federal risk exposure while preserving the economic rationale for government activity.