The Rise of Fannie & Freddie
Published in
1 min readMay 8, 2016
The mortgage system that replaced Savings and Loans was;
- Banks and mortgage brokers making individual mortgages,
- That were immediately sold to Fannie and Freddie,
- Who then put thousands of those mortgages together to create one “mortgage-backed security” which owned the flow of future mortgage payments,
- Shares in the mortgage-backed security were sold to large investors, and
- 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).