US agencies: Mortgages monsters on collision course

Something has to give. Fannie Mae and Freddie Mac – America’s colossal home mortgage securitizers – have been growing at about 11.5% per year. That’s much faster than the market they serve: the underlying market for home mortgages in America is growing at only about 6% per year.

So, Fannie and Freddie are going run into a problem, not very far down the road. Peter Wallison, a resident fellow at the American Enterprise Institute, and Bert Ely, an American banking consultant, estimate that Fannie and Freddie are on track to assume the credit risk for almost half the residential mortgages in America by the end of 2003.