Can someone explain to me how this "buying mtg. backed securities"

[napi21]

could possibly work?

As I understand it, a lender loans $$ to a home buyer and then almost instantly sells the loan. That loan is then bundled with many other loans and sold as a mtg. backed security. The intent was to lower the risk becaue it was assumed that there would be few in that bundle that would default. Obviously it didn'tt work out that way, but how is it ever determined which loans are goo & which are bad? Haven't they lost their individual identity? Even if the Feds comit to buy the "bad or risky loans" how are they going to determine which ones to buy?

[Tierra_y_Libertad]

1. The scheme originated in the P.T. Barnum School of Economics.

Guess who's getting played as the suckers.