The mortgage industry has staked out its vision for the future of Fannie Mae and Freddie Mac, offering a formula it hopes will shape what appears likely to be a long debate over a pillar of the country's housing policy.

Under a Mortgage Bankers Association proposal announced Wednesday, the government-sponsored enterprises' infrastructure, including their "technology, human capital, standard documents and relationships," would be used to help form new mortgage insurance companies — which the trade group called mortgage credit-guarantor entities — that would be allowed to fail. A range of basic mortgage products covered by the new companies would be packaged into bonds with an explicit federal guarantee, similar to what the Government National Mortgage Association provides now. (The proposal suggests that Ginnie Mae could administer the new guarantees.)

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