Quote:
Originally Posted by seattleflamer
Fanny and Freddie secure all mortgage debts not just high risk. FNM and FRE have been doing business for several decades and as GSE have an implicit backing of the gov't which has never been excerised till 08 when every single financial firm whether Citi, Bear Stearns or AIG were explicitly backed by the federal treasury to the tune of ~$1trillion.
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Well, Fannie and Freddie do not secure all mortgage debts. Far from.
I had a post lined up for Calgaryborn's "Fannie and Freddie caused everything" canard, but I just shook my head and decided not to. Why bother?
Bottom line is that F&F's contribution to the housing crisis was minor. The numbers behind F&F's holdings, and the default rate of their "risky" sub-prime / Alt-A mortgages was actually low. If anyone is interested, they need to look at the type of loans that Countrywide was financing... those are the ones that were problematic and securitized privately. Their loans were largely nonconforming and therefore ineligible for F&F's securitization and had to go to the secondary market. They did misrepresent loans to make them conforming for F&F's securitization.