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Mark Zandi of Moody’s on the need for a government backstop to mortgage finance

by Ethan Handelman, National Housing Conference

The housing bubble came from a “mortgage securitization machine [that] was fundamentally broken,” writes Mark Zandi in the Washington Post. He gives us a brief, cogent explanation of how private lenders and, to a lesser extent, regulators deserve most of the blame for the mortgage bubble, and shows that Fannie Mae and Freddie Mac simply were late to the party rather than the prime movers.

Getting recent history right is crucial to future plans. As we spend perhaps the next few years sorting out how to make mortgage finance work:

  • effectively—to serve all of the responsible borrowers who need mortgage, and
  • safely—to avoid another bailout,

we should make sure we preserve the essential government backstop and regulatory functions that keeping the mortgage system operating at all now and will keep it functioning effectively in the future.

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