No, that's not how you create a bubble, that's how you create a repeatable business model (the most stable investment possible).
That's why the interest rates on home loans are so low, ie. they have the lowest risk because that business model is so stable.
Each individual home loan that you refer to above is individually insured. Each of those loans are backed by a physical asset, too. Those home loans are bundled into loan packages (MBS) and each overall loan package is then "wrapped" with yet another level of insurance from an entirely different class of insurer. Those loan packages are then sold to thousands of different, vastly diversified investors.
That system is so stable that it could handle massive defaults before it even broke through the first level of insurance, much less the second level - or had to deal with liquidating the assets that back the loans.
Interest rates generally reflect risk. U.S. Treasury bonds are generally considered the riskless, so they usually have the lowest interest rates. Home loans are next, followed by municipal bonds, corporate bonds, consumer loans, et al.
Each of those loans are backed by a physical asset, too. Whose value is distorted by the GSE's. This loop can be reversed to destroy wealth much faster than it created it.
Those loan packages are then sold to thousands of different, vastly diversified investors.
And Fannie retains the credit risk. (and many of the loans nowadays)
Interest rates generally reflect risk. U.S. Treasury bonds are generally considered the riskless, so they usually have the lowest interest rates.
GSE debt will soon exceed publicly held Treasury debt. We may soon enter a deflationary environment that will be the Keynesian end game.
You could try to bail out housing by debasing the currency but you would have to jack up interest rates to make bonds desirable which in turn would make housing less affordable which would increase the stress on the housing bubble which is deflationary (I'm assuming given the record homeownership rates that demand is more or less satisfied). Eventually you run out of options.
Ask the Japanese.
That's how you create a repeatable business model (the most stable investment possible). False. Businesses have an optimuum size. Trees do not grow to the sky. Normal businesses notice negative feedback quickly. Government backed business who are in the business of printing money for property are trapped in a positive feedback loop that will only end when the system runs out of gain.70% homeownership is pretty amazing. How are we going to beat that?
Fannie has every incentive to grow...It has absolutely no incentive to find its correct size.