It Was The Bubble, Not Subprime, That Sank Fannie And Freddie

The NYT told readers that Fannie Mae and Freddie Mac collapsed due to their movement into the subprime and Alt-A market in 2005 to regain market share. While the move into lower quality mortgages worsened their situation, Fannie and Freddie would have suffered very large losses even if they had stuck to their traditional market. The collapse of the housing bubble led to record default rates on all mortgages. The majority of mortgages in default now are on prime loans.

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