The federal government has taken over large swaths of consumer lending, most notably the $10 trillion home mortgage and $1 trillion student lending markets. The government's share of new loans for each now approaches 100%.Government monopolies in financial services pose risks to taxpayers as well as borrowers

American Enterprise Institute (AEI) housing expert Edward Pinto assess the key facts to explain the Federal Housing Administration’s (FHA) deteriorating situation.

The 30-year fixed-rate mortgage, the most common way U.S. buyers finance a home purchase, isn’t the ideal instrument its supporters claim it to be.

In less than twenty-five years, government “affordable housing” and other housing policies have turned a healthy market into a financial ruin. Until Fannie and Freddie’s market dominance and the government’s role in the housing finance system are substantially reduced or eliminated, the United States will continue to have an inferior and unstable housing market.

Reform focused on sustainable lending would have FHA target a projected average claim rate of 5 per 100 insured loans under normal circumstances and 10 per 100 insured loans under stress circumstances.  This rate is about five times the normal default level for prime loans and about half the FHA's traditional default level under normal circumstances.

The National Association of Realtors (NAR), which pushed Congress to give FHA yet more responsibilities, is now trying to show that the agency is not really insolvent. But the slippery "facts" they are using show how tenuous their argument is.

President Obama in his State of the Union Address proposed that legislation be passed authorizing FHA to provide all homeowners that are current on their mortgage the opportunity to refinance at today's record low rates.

The US housing finance market should function without any direct government financial support. It should also ensure mortgage quality, a stable budget for assistance to low-income families, and eliminate Fannie and Freddie.