Under this model, brokers or lenders sell the loan to a third party, typically a securitizer, who then issues securities collateralized by mortgage loans to investors. This model technically describes securities guaranteed by Fannie Mae and Freddie Mac as well as private-label securities sponsored by financial institutions such as commercial or investment banks, but problems were more acute in the private-label market.
For example, valuations do appear stretched for farmland, although recent data are suggesting some slowing, and for the equity prices of some small technology firms. Still, there are areas where investors appear to have been very sanguine regarding certain types of exposure and modest in their demands for compensation to assume such risk.