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Subprime Mortgage Crisis

Subprime Mortgage Crisis

A paper that traces the subprime mortgage crisis to a policy decision by the managers of Fannie Mae (Federal National Mortgage Association) in the 1990's.  Fannie Mae insisted that lenders prove that they were not "red-lining" by fulfilling quotas of minority borrowers.  To meet these quotas lenders had to reduce the standards for their lending.  Fannie Mae enabled lenders to issue such subprime mortages by purchasing them or providing default insurance for them.  Ten years of this policy bankrupted Fannie Mae.

 

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