The days of "liar loans" and loan approvals based on not much more than a heartbeat are long gone, but the fallout from the housing crisis is far from over. While homebuyers and homeowners may be focused most on their own ability to finance a home, the federal government and real estate policy experts continue to discuss reforming the nation's home financing system. Though not every proposed reform will have a direct impact on consumers, initiatives in five key areas are likely to change mortgage financing in the future. These areas are the unfinished business of mortgage reform. -Winding down Fannie Mae and Freddie Mac. -Creation of a common securitization platform. -Reform of the compensation system for mortgage servicers. -Revision of key documents for borrowers. -Improvements to the mortgage recordation and securitization systems. Winding down Fannie Mae and Freddie Mac On June 25, Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., introduced the "Housing Finance Reform and Taxpayer Protection Act" to reform the secondary mortgage market and replace the current reliance on Fannie Mae and Freddie Mac with a private system. "While this bill may not go through as written, eventually I think we'll see something like it that essentially turns the government role in mortgage financing into something more like (Federal Housing Administration) financing, which is just insurance and not actually ownership of loans," says Richard K. Green, director of the University of Southern California Lusk Center for Real Estate in Los Angeles. Nicolas Retsinas, director emeritus of Harvard University's Joint Center for Housing Studies, expects it will take five to 10 years after legislation is passed before Fannie Mae and Freddie Mac are wound down. Right now, Fannie Mae and Freddie Mac are profitable, says Rick Sharga, executive vice president at Carrington Mortgage Holdings in Santa Ana, Calif., so that creates pressure on the government to keep them around a little longer.
