The U.S. could be headed for a new mortgage crisis by this summer, believes one analyst. Richard X. Bove, Vice President of Equity Research at Rafferty Capital Markets, said in a report dated March 1 that it’s looking increasingly likely that we will see one. He highlighted how much control the government now has over the nation’s mortgage markets and explained how this could be a recipe for disaster.

U.S. government controls the mortgage markets

Bove pointed out that the U.S. government now insures one-fourth of all new residential mortgage loans and purchases one-sixth of all residential mortgage loans issued. Further, government-sponsored enterprises Fannie May, Freddie Mac and Ginnie Mae own or ensure three-fifths of all current outstanding mortgages in the country, and the problem is getting worse and worse every quarter, he said.

He added that the government continues to increase its direct ownership of the mortgages as well, suggesting that we could see a whole new mortgage crisis characterized by the government getting too deeply entrenched in it.

Fannie Mae, Freddie Mac rule the roost

Bove notes that Fannie Mae and Freddie Mac together either own or insure 45.9% of the mortgage market right now, amounting to $4.6 trillion in total. In 2009, the twogovernment-sponsored enterprises owned or insured 41.9% of the market. Following Fannie and Freddie is the private sector in terms of size, as he said it controls 38.8% of outstanding mortgages, amounting to $3.9 trillion.

Ginnie Mae is wholly owned by the government, and although it currently sits at the bottom of the mortgage market in terms of size, he said it’s the fastest growing. Currently it holds 15.2% of the market at $1.5 trillion worth of mortgages. In 2009, its share was only 5.7%. In fact, Bove said Ginnie is growing so rapidly that it’s stealing market share not only from the private sector but also from Freddie and Fannie as well.

US Government Keeps Intervening