The secondary market for housing finance in the United States: A brief overview

Understanding both the current problems in the secondary market and the proposed solutions requires an understanding of the role of the secondary market in U.S. housing finance. In this chapter' we focus in particular on the government-sponsored enterprises (GSEs)' Fannie Mae and Freddie Mac' which for decades were the largest players in the U.S. system.2 We first review the history of the secondary market and summarize the basic operations of the GSEs before they were placed into conservatorship by the U.S. Treasury in September 2008. We then outline the key arguments that are made about the strengths and weaknesses of the GSEs' structures' for both the single-family and multi-family housing finance markets.