Ten years ago, the Federal Housing Finance Agency seized Fannie Mae and Freddie Mac, placing them in conservatorship. The federal agency did this because the mortgage giants’ $5 trillion loan portfolios were in danger of default.

In defending this action, then-Treasury Secretary Henry Paulson said at a press conference: “Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in the financial markets here at home and around the globe.”

Fannie Mae and Freddie Mac were established to create a secondary market in mortgages to expand home ownership, a bi-partisan goal. Fannie Mae and Freddie Mac came to guarantee about 40 percent of all home loans, helping millions of Americans buy residences.

At the time, the conservatorship was expected to be temporary. In the first few years of conservatorship, as home values plummeted and foreclosure rates spiked, Fannie Mae drew $119.8 billion and Freddie Mac drew $71.6 billion from the Treasury to stay afloat, according to quarterly filings.

Eventually, when the economy recovered, Fannie and Freddie repaid all of that money and the U.S. government has earned a net profit of some $88 billion, with further profits are expected.

Fannie and Freddie, along with Federal Housing Administration, back a majority of new home loans. These loans and our strong economy have supported a strong housing market. Today, prices are 11 percent higher than their 2006 peak, according to the S&P CoreLogic Case-Shiller Index.

The future of these quasi-governmental corporations, known as government-sponsored enterprises, remains a question mark. With each passing year, the power of inertia becomes even greater, as the companies’ profits help to reduce the federal budget deficit. As Laurie Goodman, co-director of the Urban Institute’s Housing Finance Policy Center, said recently: “The system is working well enough that there’s not much urgency in Congress to fix it.”

That said, Secretary of the Treasury Steve Mnuchin has said that he will work on a bi-partisan basis to alter the roles of Fannie and Freddie.

Although there has been a wide range of reform proposals for the government-sponsored enterprises, I have lumped them into three basic categories.

• Pure privatization: Under this scenario, the private financial sector would have full responsibility. If the government did get out of the mortgage business, there are serious questions about what would happen to the price and availability of mortgages. I have concerns about whether the fixed-rate, 30-year mortgage would survive because America is the only country in the world where this is a common mortgage instrument.

• Government-private partnerships: Under this proposal, the government would offer guarantees for most of the value of privately issued mortgage-backed securities. The GSEs would be wound down and replaced by private financial institutions. Liability for losses would be shared by the homeowner, private financial institutions and the government. How this liability would be divided among them is subject to negotiation.

• Keep the GSEs in their current form. In effect, we could merge Fannie Mae and Freddie Mac into one company and turn the conservatorship into a permanent arrangement. Having GSEs as purely government-owned companies eliminates the moral hazard under the prior system where Fannie Mae and Freddie Mac made enormous profits by taking huge risks.

Because home ownership is so important to the American public, we need to take steps to assure this goal. A survey in the 2017 State of the American Dream report by Hearth magazine showed that, “Of Americans who said they think achieving the American Dream is important, 70 percent think homeownership is important to the dream, and 41 percent think homeownership is very important to the dream.”

My proposal is that the government guarantee mortgages for starter homes or in cases in which a homeowner is moving more than 50 miles to secure employment. I would continue to allow a tax deduction for mortgage-interest payments for mortgages of $750,000 or less.

Originally published in the Sarasota Herald-Tribune