A study released last month by the Center for Housing Policy revealed that the number of working families paying more than half their income for housing has increased by 76 percent. In l997 2.4 million working families spent more than half their income on housing, and in 2003 the number had increased to 4.2 million.

Considering that the homeownership rate in the United States climbed to an all time high in 2004 to 69 percent, and that since early 2002, the housing production component of the GDP -- Residential Fixed Investment (RFI) -- has more than doubled the growth of overall GDP, the study's numbers point out the dichotomy in today's housing market.

For the "housing haves" it has been a time of opportunity. However, for the housing "have nots," the difficulties are increasing and the gap is widening.

One of the keys in addressing the nation's housing challenges is to recognize the importance of the housing finance system, which is still evolving out of the problems that existed in the early l980s.

When Ronald Reagan was elected president, mortgage interest rates were over 14 percent, and the homeownership rate was headed to 64 percent where it stayed for most of the 1980s. With the availability of mortgage credit varying from region to region and the savings and loan industry, which had provided the backbone of the nation's housing finance system for over 40 years, experiencing serious problems, the nation's housing finance system was in turmoil.

President Reagan's response was to establish the President's Commission on Housing. When I served as the staff director of that commission, the question we were dealing with was "where would the credit come from to finance the nation's housing?" In 1982, as a result of this interest rate/institutional crisis, we determined that "a broader-based and more resilient system will be needed to supply the funds a strengthened housing industry will require."

The solution to this broader-based system was an expanded secondary market for housing. The Secondary Mortgage Market Act of 1984 was passed with bipartisan support in October of that year, and the role of the Government Sponsored Enterprises (GSEs) of Fannie Mae and Freddie Mac quickly grew. In 1984, 28 percent of the mortgages originated were sold in the secondary market, and now 50 to 60 percent of the mortgages are routinely sold in the secondary market. Of the home loans originated in the conforming price range, $359,650 and below, where Freddie Mac and Fannie Mae are allowed to buy mortgages, about half are purchased by these two GSEs.

There are no longer regional variations in the availability and price of mortgage credit. Reduced down payments and a wide variety of mortgage instruments have made a major difference in extending mortgage credit to homebuyers, and the United States is the only country in the world with a widely available 30 year fixed-rate mortgage without significant prepayment penalties. Freddie Mac and Fannie Mae help assure the liquidity and stability of mortgage credit by linking the U.S. housing finance system with national and international credit markets and as such play an enormously valuable role in the nation's housing finance system.

However, over the last several years, problems have arisen again. First, Freddie Mac and then Fannie Mae have experienced accounting issues and questions of regulatory oversight, and this has led to strong calls for reform. Both the U.S. Senate and House are reviewing important proposals for change. It's clear that action to establish a strong regulator for these two organizations, as well as the Federal Home Loan Banks, and to assure that the operations of the GSEs are safe and sound is necessary, both for the financial security of the taxpayer and for the long term future of the housing finance system.

In achieving this reform, though, it is essential that actions be legislated that will address the problems while at the same time preserving the housing mission of these two organizations. They play an essential role in addressing the problems of housing affordability that the study by the Center for Housing Policy highlighted. Now is the time for reform, but it must be done so that their crucial mission to expand homeownership and affordable rental housing can be preserved.