Fannie-Freddie Knee-Deep in Subprime Mortgages
In 2003, the two bought $81 billion in subprime securities. In 2004, they purchased $175 billion — 44 percent of the market. In 2005, they bought $169 billion, or 33 percent. In 2006, they cut back to $90 billion, or 20 percent. Generally, Freddie purchased more than Fannie and relied more heavily on the securities to meet goals.
By buying those loans Fannie and Freddie allowed lenders to issue more mortgages which were bought by Fannie and Freddie. That vicious circle lead to the two companies owning or guaranteeing half the U.S. mortgage market.
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