The Treasury Department proposed Friday to set a mandatory 10 percent down payment for US home buyers and to wind down state-backed mortgage lenders that have underpinned the housing market for 40 years.
"The plan is for fundamental reform, to wind down the GSEs (government-sponsored enterprises), strengthen consumer protection and preserve access to affordable housing for the people who need it."
Launching what could be the biggest shake-up of the housing market in a generation, the Obama administration said home buyers should have to put down at least a 10 percent deposit to buy a home.
The wide-ranging proposals effectively end the US government's long-standing support for the goal of having every American own their own home.
"The administration believes that we must continue to help ensure that Americans have access to quality housing they can afford," the proposals said.
"This does not mean, however, that our goal is for all Americans to become homeowners."
While some proposals would have a direct and quick impact on home buyers, it is the reforms of Fannie Mae and Freddie Mac that may have the broadest effect.
The two firms, which before the crisis back-stopped around three quarters of the housing market, have come under fire for their role in the fueling the housing bubble.
In the wake of a long and painful recession the government has been left to guarantee -- directly or via deals with bank lenders -- "more than nine out of every 10 new mortgages."
Yet despite their role in the financial meltdown, reforming Fannie and Freddie remains political charged.
Supporters argue the lenders have made housing affordable for millions of poorer Americans.
Critics say they represent unwarranted government to interference in the housing market.
The Obama administration called on Congress and stakeholders to have an "honest discussion" about the way forward.
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