Uncle Sam Plays Mortgage Monopoly

The Wall Street Journal has an interesting article about the government role in the housing market.

According to the article, the Government Sponsored Enterprises (Freddie Mac, Fannie Mae, and Ginnie Mae) backed a whopping 96.5% of all loans issued the first three months of this year.  This makes sense to me.  I closed a conventional loan with a client this month for the first time since September 2008.  Traditional bank mortgages and the private sector mortgage markets are scarce indeed.   

You may see Zions Bank, Wells Fargo, and Bank of Utah issuing home loans.  But the truth is that almost all of these loans are made available from the same source: The GSEs.  This lopsided mortgage marketshare enjoyed by the GSEs just creates weirdness in the housing market.

Yet, where there is crises there is opportunity as default rates for government backed loans remains high:

Freddie Mac on Friday said that the number of mortgages that were 90 days or more past due fell to 4.13% in March from 4.2% in February, the first monthly decline in three years.

"We're certainly going to reach a point of stability this year, but it's going to be stabilizing at these very high levels," said Ted Jadlos, president of LPS Applied Analytics, a real-estate research firm. The backlog of delinquent loans in some stage of foreclosure will keep pressure on housing markets and could take two to four years to clear, he said.

So, if you are bargain hunting, here is your two-to-four year warning.  The buyer's market will last several more years.  It's better not to get caught in a seller's market trying to buy real estate bargains.