The private sector is fighting the government for control of capital markets, and the government is winning. The most recent data from the Federal Flow of Funds reveal that Uncle Sam stands behind over 58% of the mortgage market – a hike of 13 percentage points since 2006.
It is not easy to gain 13 percentage points of market share in an $11 trillion market. The stunning growth in governmental backing has come about thanks largely to federal dominance of mortgage finance since the financial crisis. Despite the fact that management failures at the GSEs resulted in more than $160 billion in losses for taxpayers, Fannie Mae, Freddie Mac and the FHA underwrite well over 90% of all new mortgages today. In short, each passing day moves us closer to a world where nearly all mortgage finance – past and present – will be handled by government-backed institutions.
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