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2018-03-03 — usnews.com

Without the GSEs, the mortgage market would not look radically different than it does today. Proponents argue that the GSEs lower mortgage rates, ensure the availability of the standard 30-year fixed rate mortgage, support home ownership and lend to people with lower incomes or weaker credit profiles, all of which the private sector presumably would not do. Not true on all fronts.

Since 2009, the GSEs have been required to recognize risk in their pricing of mortgages, which has driven up their mortgage rates relative to the private sector. As a consequence, since 2014, new research undertaken with my colleague Steve Oliner shows that mortgage rates for private portfolio whole loans have been about one-quarter percentage point below GSE rates -- after controlling for risk characteristics.

And contrary to Treasury Secretary Steven Mnuchin's recent statement, the private market could ensure the availability of the 30-year fixed-rate mortgages on its own. Data from CoreLogic show that 76 percent of private portfolio mortgages originated in 2017 were 30-year mortgages, not much below the GSE's 85 percent share.

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