Kyle Rizdahl

Nonetheless, Marketplace's Justin Ho looked into how mortgages become mortgage bonds and what will happen if Fannie and Freddie do wind up buying $200 billion worth of them.

Nonetheless, Marketplace's Justin Ho looked into how mortgages become mortgage bonds and what will happen if Fannie and Freddie do wind up buying $200 billion worth of them.

Mortgage bonds start with mortgages.

Mortgage bonds start with mortgages.

When a borrower takes out a 30-year fixed-rate loan, the lender usually isn't in it for the long haul.

When a borrower takes out a 30-year fixed-rate loan, the lender usually isn't in it for the long haul.

That's Chris Duncan, chief lending officer at LaSalle State Bank in Illinois.

That's Chris Duncan, chief lending officer at LaSalle State Bank in Illinois.

He says his bank usually doesn't want to hold on to long-term mortgages because they pay the bank a fixed interest rate for decades, and that would be a bad investment if interest rates were to rise.

He says his bank usually doesn't want to hold on to long-term mortgages because they pay the bank a fixed interest rate for decades, and that would be a bad investment if interest rates were to rise.

So instead, LaSalle State Bank, like most banks, sells off almost all of its long-term mortgages to the big government-backed mortgage companies.

So instead, LaSalle State Bank, like most banks, sells off almost all of its long-term mortgages to the big government-backed mortgage companies.

Our preference most of the time is going to be to sell those loans to Fannie Mae.

Our preference most of the time is going to be to sell those loans to Fannie Mae.

Fannie Mae and Freddie Mac buy up truckloads of mortgages and package them into bonds called mortgage-backed securities.

Fannie Mae and Freddie Mac buy up truckloads of mortgages and package them into bonds called mortgage-backed securities.

That's Nancy Wallace, a professor at UC Berkeley.

That's Nancy Wallace, a professor at UC Berkeley.

She says investors love mortgage-backed securities because their steady stream of income from all of those mortgage payments is considered almost as safe as U.S.

She says investors love mortgage-backed securities because their steady stream of income from all of those mortgage payments is considered almost as safe as U.S.