Instead of private banks competing for borrowers to lend money too, credit for home mortgages has dried up as private banks retreat into the trenches and lick their wounds. To fill the void, our own government has stepped in to save the day and provide funding for home loans. I found this stunning chart while online today that truly illustrates what has happened to the market place:
Fannie Mae, Freddie Mac, and Ginnie Mae are all government sponsored mortgage originators. They provide "liquidity" to the market by guaranteeing or insuring losses on loans that they originate. Taxpayer money is now used for this purpose. They handle FHA, VA and certain agricultural loans. As you can see from the chart, all three agencies total 95% of our marketplace! For the mortgage market to get back to normal, we need private sector lending to step up to the plate. Unfortunately, I believe it may be several years before we start to see that again.
In the meantime, we can all put this bumper sticker on our cars:
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