by John L. Ligon, David B. Muhlhausen
The Heritage Foundation
January 16, 2013
The estimated results in recent Heritage studies provide additional insight and evidence that government-sponsored enterprises should not be part of the path to a new mortgage market. Eliminating Fannie Mae and Freddie Mac could save billions of taxpayer dollars in the U.S. mortgage market through eliminating the subsidy that has induced U.S. households to take on more debt-related consumption, ending up underwater. Indeed, many households were never in a position to handle such debt; therefore, subsidizing them to become homeowners is not only inconsequential in raising homeownership but also detrimental to the financial market. More important, the results of our studies suggest that the effects of removing these subsidies would be minimal and predictable both on the U.S. housing market and on the overall economy.