Peter J. Wallison and Edward J. Pinto write,

The Trump administration has finally turned its attention to housing policy. Unfortunately, the president’s Memorandum on Housing Finance Reform, issued last week, is a major disappointment. It will keep taxpayers on the hook for more than $7 trillion in mortgage debt. And it is likely to induce another housing-market bust, for which President Trump will take the blame.

Friday’s WSJ reported that Mark Calabria has been confirmed as head of the Federal Housing Finance Administration. It will be interesting to see what he does.

In my opinion, what he ought to do is the following:

1. Coordinate the credit policy and marketing policy of Freddie Mac, Fannie Mae, and FHA. As it stands now, they are dealing with the same mortgage lenders on somewhat different terms. That situation is ripe for gaming by the mortgage lenders.

2. Get the government out of the business of subsidizing mortgage loans that do not contribute to saving through equity buildup in a primary residence. Stop guaranteeing loans for income properties and for second homes. Stop guaranteeing loans for second mortgages, home equity lines of credit, or cash-out refinances. Stop guaranteeing loans with negative amortization.

3. After that, it might be desirable to gradually reduce the agencies’ presence in mortgage markets. The most straightforward way to do this would be to slowly bring down the maximum size of a mortgage eligible for guarantees by agencies. But this really ought to be done through Congress.