1Center for American Progress | International Mortgage Finance 101
International Mortgage Finance 101
The United States Isn’t Alone in its Government Supportfor Housing Finance
David Min June 13, 2012
Many conservatives critical o the ederal government’s role in mortgage markets claimthe United States is unique among developed economies because it provides govern-ment guarantees or its housing nance system. Tis claim, however, is based on a un-damental misunderstanding o how other developed countries’ housing nance systemsare structured and how those countries’ governments provide guarantees to their mort-gage markets. In act, every other advanced country in the world provides signicantlevels o government guarantees to their housing nance systems, as this InternationalMortgage Finance 101 will explain.
How does the United States provide government supportfor housing finance?
Te ederal government supports housing nance primarily through backing the mort-gage securitization entities Fannie Mae, Freddie Mac, and Ginnie Mae, which togetheraccount or about 60 percent o all outstanding U.S. home loans (and about 90 percento loans originated since the 2008 nancial crisis).
Tese three institutions purchaseand pool mortgages that meet their underwriting standards and sell the cash ows romthese mortgage pools to investors in the orm o mortgage-backed securities, backed by a government guarantee.But the ederal government also supports housing nance in other important ways,including its provision o ederal deposit insurance to banks and other depository insti-tutions. Tis ederal deposit insurance—much like the ederal guarantee behind Fannie,Freddie, and Ginnie—is meant to ensure a broad, constant, and afordable supply o mortgage unding available.In act, or most o the 20th century, ederal deposit insurance was the primary way theederal government supported housing nance, as ederally insured depository institu-tions accounted or more than 70 percent o all home loans originated in the post-World War II period up until the 1980s.