One statistic tells the real story of today's mortgage market: Almost every single loan originated today is bought by Fannie Mae, Freddie Mac, or winds up as collateral for a bond guaranteed by the Government National Mortgage Association.
In short, the residential loan business remains on government life support and probably will stay that way for the next three years.
Data compiled by National Mortgage News showed Fannie, Freddie and Ginnie Mae with a combined "purchase" market share of 98% in the first quarter, a slight decline from the near monopoly (99%) they had on the business the year earlier.
Ten years ago Fannie and Freddie had a combined purchase market share of about 50%, and Ginnie held a meager 5%.
National Mortgage News derived its market share numbers by taking the loan purchases of the two government-sponsored enterprises (and the bond issuance of Ginnie, which reflects Federal Housing Administration and Department of Veterans Affairs production) and dividing it by industrywide originations for a given period.
It is no secret to seller/servicers that these three entities dominate the secondary market, setting loan standards for 60 million borrowers. The numbers also indicate that very few lenders keep whole loans on their balance sheets, except for jumbo mortgages and, perhaps, conventional adjustable-rate mortgages.
By National Mortgage News' tally, Fannie dominated the secondary market in terms of loan purchases in the first quarter, buying $191 billion in mostly residential loans from its approved seller/servicers. The GSE had a purchase market share of 50%, more than double Freddie's share. Ginnie was a close second to Freddie.
Some members of Congress would love to dismantle the GSEs; Republicans have criticized the White House and Democrats for punting on the Fannie/Freddie issue until next year.
Though the two have been wards of the government for almost two years, costing taxpayers $140 billion, few members of Congress have come up with plans for replacing Fannie and Freddie's balance sheets should they disappear.
Together, the two GSEs guarantee $5 trillion in loans, or half the outstanding mortgage debt in the United States.