They tapped into a nationwide pool of loan officers to work in local markets and increase their reach.

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Lending Club and Prosper vet thousands of loan applications, whittling down the pool to only those borrowers the company deems least likely to default.

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When borrowers fail to keep up payments on mortgages in the pool that supports asset-backed loans, Fannie and Freddie must buy back the loan.

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This will leave the high-risk pool now has two options: turn to credit unions, or give up on getting a loan.

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