Final answer:
After the securitization of mortgages, Fannie Mae and Freddie Mac purchased a significant amount of mortgage-backed securities, spurred by the Fed's quantitative easing program which began with a $600 billion purchase in QE₁.
Step-by-step explanation:
The question relates to the Federal Reserve's practice of quantitative easing (QE) and the actions of Fannie Mae and Freddie Mac after the securitization of mortgages. During QE₁, starting in November 2008, the Fed purchased $600 billion in mortgage-backed securities from these government-sponsored enterprises. The large influx of capital meant to stabilize the financial markets led Fannie Mae and Freddie Mac to buy a substantial amount more of these securities.
Fannie Mae and Freddie Mac were key players in the mortgage market, and their extensive purchasing of mortgage-backed securities resulted from lenders off-loading the risk of mortgage defaults onto these government-sponsored entities and investors. The subsequent financial crisis highlighted the issue with this practice as many lenders had approved risky loans, relying on the resale of mortgages through the securitization process.