According to Aaron Pressman, writing in Bloomberg BusinessWeek in 2008, Fannie and Freddie were victims, not perpetrators, of the housing crisis.
Pressman writes that Âvirtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie … most subprime mortgages did not meet Fannie or FreddieÂs strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrowerÂs income or employment history? All made in the private sector, without any support from Fannie and Freddie.Â
ItÂs time to lay blame for the housing crisis, and by extension the recession, where it belongs. The packaging and selling of mortgage-backed securities allowed private mortgage lenders to make loans they knew were going to be uncollectable. However, someone else would be left holding the worthless mortgage.
In a previous article we noted that Fannie Mae and Freddie Mac would not recognize Beneficial Finance and HFC. When employees thought HSBC might save the company, and thus their jobs, we discovered many branch managers could not even pass a background check and could not be licensed.