Housing finance reform has failed to make much progress since the financial crisis. In fact, if another downturn were to hit our housing market as it structured today, the American taxpayer would be directly and legally on the hook for every single one of the $6 trillion to which the federal government is directly exposed through Fannie Mae, Freddie Mac and government loan programs.

Clearly, the United States needs a system in which credit risk is better dispersed. If risk is appropriately priced and incentives are properly aligned, mortgage credit can remain widely available to would-be homebuyers while taxpayers are insulated from bearing losses. While there is much disagreement about the best way to transition to a new model, there is general consensus on one proposition: we must bring in private capital as a key component of long-term reform.

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