Ever since the dust settled from the 2008 financial crisis, there has been focus in Washington on what to do with the two main government-sponsored enterprises (GSEs), Freddie Mac and Fannie Mae, which today back $5 trillion of America’s mortgages, almost half the national total. In the crisis, the two companies were taken over by the US government in an obscure legal status called conservatorship, in which the two companies operate essentially as wards of the US government under the control of the Federal Housing Finance Agency, a relatively new financial regulator. They also receive financial support directly from the US Treasury.

And there they remain today, more than a decade later. It is seen as the last piece of unfinished business from the crisis.

Focus on the GSEs has taken the form of congressional hearings, proposed bills, think tank papers, industry white papers, books, academic conferences, and so on, all dedicated to ideas for comprehensive reform of the housing finance system. Such ideas, with varying degrees of practicality, have ranged from a single government-owned corporation to replace the GSEs, to an industry cooperative to replace them, to breaking them up into more, smaller firms, to enticing new entrants to compete against them, and even to the extreme of just getting rid of them and letting the private market, in some fashion, replace their functionality.

These ideas all require legislation. And given the differing views on the right way to proceed between the two parties, it is no surprise in this era of congressional dysfunction that no bill has been passed to implement any of the ideas about comprehensive reform. And so many people, especially inside Washington, state with some resignation that “nothing has changed, GSE reform remains undone.”

Meanwhile, others – especially participants in the mortgage industry itself – talk about how well the GSEs are currently operating, better than ever according to many, pointing to the many reforms made during conservatorship. In fact, increasingly, even government officials talk about how GSE reform has mostly been completed in conservatorship.

This seeming contradiction is explored and explained in my new Industry Perspectives paper, GSE Reform: None or Mostly Done? In the paper, those claiming “none” are referring to comprehensive reform – i.e. major and fundamental changes in the structure and operations of the housing finance system (which requires legislation). Those claiming “mostly done” are referring to fixing the existing system, where incremental reform during conservatorship has competently addressed the major flaws of the system.

And, as pointed out in the paper, the reforms to date can easily be retained if the government ends the conservatorships, and reinstates the two companies as private entities with regular ownership through the stock market, even if it does so through administrative means (i.e. no legislation required). This would not be “recap and release” (to which many object because it implies the GSEs would be able to operate as they did prior to 2008), it would be “reform, recap, and release” and would represent a major improvement in the existing system of housing finance, far better than it was structured pre-2008.

And increasingly, industry executives are supportive of the incremental reform approach, because it has largely proven itself during conservatorship and represents a low-risk approach to an improved housing finance system, compared to the great unknown of how comprehensive reform proposals – if Congress could ever agree on one – would actually work in practice and not just theory.