Government backed 96.5% of all home loans in Q1

A friend of mine sent me two interesting links from the WSJ. The first one is about the Role in Mortgage Market Grows Even Larger of the US Government:

The U.S. government's massive share of the nation's mortgage market grew even larger during the first quarter.

Government-related entities backed 96.5% of all home loans during the first quarter, up from 90% in 2009, according to Inside Mortgage Finance. The increase was driven by a jump in the share of loans backed by Fannie Mae and Freddie Mac, the government-owned housing-finance giants

90% was already an unbelievable number, but 96.5%? It really means that due a combination of insolvency and unwillingness to take on risk, the banks are not lending anymore and that the only lender remaining in the market is the government. Unfortunately, the government is distorting the markets and is willing to lend money for rates that are not adequate with the level of risk taken. This means probable further losses, and longer time for the housing market to reach its normal level, with a lot of pain all the way down.