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.

In the current debate about reform of the housing finance market, proponents of a continuing government role frequently argue that without government backing, the so-called "to be announced" (TBA) market could not exist. But that's simply not true.

As policymakers continue their efforts to reduce the government’s role in the currently nationalized housing market, the broadly available and deep subsidies provided to the five divisions of the Government Mortgage Complex continue to distort the marketplace and thwart these efforts.

The housing system can function perfectly well without government backing. The key is making sure most mortgages are prime loans.

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.

These three studies are: 1. Sizing Total Exposure to Subprime and Alt-A Loans in the U.S. First Mortgage Market as of 6.30.2008, 2. Sizing Total Federal Government and Federal Agency Contributions to Subprime and Alt-A Loans in the U.S. First Mortgage Market as of 6.30.2008, and 3. High LTV, Subprime and Alt-A Originations Over the Period 1992–2007 and Fannie, Freddie, FHA, and VA‘s Role.

The best long-term solution for Fannie Mae and Freddie Mac is privatization: as private entities they will not create future losses for taxpayers, and a private system will encourage more innovation, efficiency, and competition, which should lead to lower mortgage rates.

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.