Why did a program targeted for the poor end up affecting so many middle-income borrowers? The prospect of profiting from housing price appreciation encouraged many (not just the urban poor) to do whatever it took to get access to highly subsidized mortgage credit, including exaggerating their incomes. The mortgage underwriting standards adopted by Fannie and Freddie in order to meet their affordable lending mandates had to apply to everyone, not just low-income, urban borrowers. A two-tiered underwriting system was not possible, as it would have been an explicit recognition that the loans the GSEs were purchasing were of low quality.
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