The Rise of Fannie & Freddie

The mortgage system that replaced Savings and Loans was;

1. Banks and mortgage brokers making individual mortgages,
2. That were immediately sold to Fannie and Freddie,
3. Who then put thousands of those mortgages together to create one “mortgage-backed security” which owned the flow of future mortgage payments,
4. Shares in the mortgage-backed security were sold to large investors, and
5. Fannie and Freddie took the money from the sale, bought more individual mortgages, created more mortgage-backed securities, sold them, and so on.

Fannie and Freddie’s share of the mortgage market rose from roughly 10% (1980) to 50% (2000).