ON WEDNESDAY, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. will mark their ninth anniversary under what was supposed to have been temporary federal control, but Congress still seems far from legislating a permanent fix for the housing finance giants. The two entities continue to back roughly half of all residential mortgages in the United States; and they continue to do so under the conservatorship of their regulator, the Federal Housing Finance Agency (FHFA). Overall, conditions in residential real estate are generally benign, with prices and equity back to pre-2008 levels, interest rates moderate and the homeownership rate having bottomed out at a possibly more sustainable level. Nevertheless, continuing uncertainty over the future of mortgage finance — i.e., the future of Fannie Mae and Freddie Mac — remains a drag on the market.

A key goal for reform should be to prevent the reemergence of the old model that combined profit-seeking and a nontransparent government guarantee, badly distorting Fannie Mae and Freddie Mac's performance and leaving taxpayers vulnerable to a massive bailout during the Great Recession. To be sure, the two government-sponsored entities are profitable once again and have repaid the bailout. What's more, the FHFA has been quietly taking steps to reduce taxpayer risk without new legislation. At the regulator's insistence, Fannie Mae and Freddie Mac have sold tens of billions of dollars' worth of newly designed securities that, unlike their traditional offerings, require private investors to absorb some loss if the underlying mortgages default. Total sales of the securities are expected to exceed $50 billion soon, according to a recent Wall Street Journal report. The risk thereby transferred to private investors may render the entities less vulnerable to a federal bailout in the event of another recession. Additionally, the FHFA and the entities are shrinking formerly vast investment portfolios and making progress toward a technologically up-to-date shared "platform" for pooling large numbers of vetted mortgages safely into marketable securities.

Both of these trends should help ease the transition to a new system in which the private sector takes the lead in mortgage finance, with government, at most, providing a guarantee against a catastrophic meltdown. That basic concept has been at the center of various bipartisan legislative proposals over the course of Fannie Mae and Freddie Mac's near-decade as wards of the federal government. Despite the high-level agreement, no bill has managed to pass both houses of Congress. Republican free-market purists have balked at any residual government role; Democrats have insisted on higher levels of mandatory assistance to "underserved" borrowers.

No one should be deceived by current relatively placid conditions. Indeed, Fannie Mae and Freddie Mac's capability to transfer risk to the private sector could quickly evaporate if the economy slows and investors start demanding a higher premium for taking on the risks associated with even relatively safe loans, which is what the two have mostly been selling so far. Housing is a vital sector, and housing reform is the last great piece of unfinished business from the Great Recession. Congress and the Trump administration must get busy putting a permanently revamped mortgage finance system in place before unforeseen events once again put pressure on the old one.