Mortgage backed securities are not a very good example of free market distortions.
Edit: I noticed you've added something about the housing ownership structure in Denmark. I think this is not very relevant to the discussion, but I also think it would be nice in the US if the law were more encouraging to the sort of ownership structures you described. I also think that kind of thing would still be rare because US citizens are a lot more mobile than Europeans and happen to like it that way.
EDIT probably too late to fix the downvotes, but Regulation Q limited the interest rate that banks could pay out. After banks had lent out their money, they couldn't raise any more, especially if interest rates were high, as happened more than once. But if they could sell off their loans to the GSE, they could get more capital back, and lend it out some more.
Of course, this led to problems. But if we don't understand the psychology that led to securitization as being the natural solution to the previous column, how do you know you are being any wiser about suggesting what is going to replace securitization?
(I simplify a bit, because securitization also allows banks to diversify geographically.)
Though here in Denmark there is actually a significant degree of central planning of housing, via a strong state role in the overall urban-planning framework, and laws that encourage owner-occupation and cooperatives, while discouraging absentee real-estate investment. There are constant debates over it, but going to a fully liberalized market approach doesn't seem too popular.