This was the basic structure of what became known as “originate to distribute.” Mortgage lenders no longer needed to hold the mortgages on their balance sheets; they became brokers operating for a fee. The government-backed credit rating of the GSEs backstopped the entire system. Starting in the 1970s, as they confronted the instability of interest rates and its damaging implications for America’s mortgage model, the GSEs took a further critical step. Working with the help of investment banks, they pioneered securitization.19 Rather than holding the locally originated mortgages on their own
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