posted by rick on October 9th, 2008 at 5:02AM
Yes and no.
The banks knew they could safely take on the risk, because of two reasons:
- Housing prices were rising, which makes subprime mortgages essentially a non-risk
- A lot of these loans were bought out by Freddie and Fannie afterwards anyway, so the original lenders didn't have any risk. And Freddie and Fannie was backed by the government, so you are correct there.
The banks knew they could safely take on the risk, because of two reasons:
- Housing prices were rising, which makes subprime mortgages essentially a non-risk
- A lot of these loans were bought out by Freddie and Fannie afterwards anyway, so the original lenders didn't have any risk. And Freddie and Fannie was backed by the government, so you are correct there.
