Who Invests In Mortgages?

In mid-2004, about half of mortgages were privately owned; now, well under 10% of mortgages are privately owned. This is an 80% decline in market share.

Fannie Mae and Freddie Mac have about the same market share as they did before the housing bubble, but Ginnie Mae, which issues federally backed debt, has seen its market share grow to pick up the slack created by a decline in bank owned and private investor owned mortgages.

Put another way, as anemic as the housing market is now, buying a home would be far harder without federal funding of mortgage lending. The private sector has all but abandoned mortgage lending without federal affiliated agency funding.

The market has decided that private investors, whose mortgage portfolios have very high default rates, are less effective monitors of the quality of the underlying mortgages than the federal agencies who have come to dominate the market.