The financial crisis has upset the linkage between mortgage borrowers and capital markets and has revealed a number of important problems in our system of mortgage finance, including weaknesses in the structure and oversight of the GSEs and perhaps in the originate-to-distribute model of credit provision itself.
Private-label securitization has largely stopped, and Fannie and Freddie were placed into conservatorship by their regulator after they were judged to be operating in an unsafe and unsound manner. Our task now is to begin thinking about how to best reestablish a link between homebuyers and capital markets in a way that addresses the weaknesses of the old system.