Banks lending money to people who didn't meet this criteria and then selling the mortgage to Fannie Mae is one of the things that contributed to the housing fiasco.
“Banks lending money to people who didn’t meet this criteria and then selling the mortgage to Fannie Mae is one of the things that contributed to the housing fiasco. “
Fannie and Freddie purchased “conforming loans”. Conforming loans are the very sort that Starstruck applied for. They required a lot of documentation, and usually a substantial downpayment.
Fannie and Freddie actually lost market share during the bubble for the very reason that they required conforming loans. Their new private market rivals didn’t. Private market lenders developed the exotic loans that exploded onto the market in 2003 and kept the real estate bull market going for another three years. And then those exotic loans themselves began to explode along with the derivatives built on top of them.