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.

In the latest Financial Services Outlook, American Enterprise Institute (AEI) housing experts Peter Wallison and Edward Pinto explain how decades of government intervention have gravely harmed America's housing market.

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In 2011, the Government Mortgage Complex accounted for 88 percent of all first-mortgage originations in the United States, with the government also controlling an estimated 90 percent of the student loan market. The government’s growing dominance in the home mortgage and student loan categories is cause for concern, posing a threat to private investors, borrowers, and taxpayers.

The U.S. housing finance market should be governed without direct government financial support, Fannie Mae or Freddie Mac.

For many years, community financial institutions have been denied fair and equal access to the secondary market. Banks prosper by making prudent loans with an adequate return and maintaining a reasonable cost structure. Today 97 percent of our banks are community banks and they are increasingly finding this business model under siege.

AEI's latest housing finance plan eliminates the need for government guarantees and permits the gradual elimination of Fannie Mae and Freddie Mac.