From the Out of Control Policy Blog:

Sometimes you don't want all the details on how government-funded guarantee programs work. Sometimes you do. For those interested, here is a very brief summary of the way that Fannie Mae and Freddie Mac are continuing to bail out mortgage investors through their guarantee programs:

When you get a mortgage, the rights to your loan payments are typically sold to a secondary source. There is a lot of debate over whether the originator of the loan should keep some of the risk, but currently they can make a loan, sell it, and basically be done with it, unless they have lied about its contents and are forced to buy it back down the road.

So the mortgage is sold to the secondary market, likely Fannie Mae or Freddie Mac. In fact, the GSEs and FHA bought or guaranteed 95% of all new mortgages in fiscal year 2011! Mind blowing numbers compared to...

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