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Conforming mortgages are appropriately named; they "conform" to the mortgage underwriting guidelines of Fannie Mae or Freddie Mac. Mortgages meeting these criteria are securitized on Wall Street as mortgage-backed bonds.

As mortgage performance has weakened, however, lending standards have tightened. Today's would-be borrowers are asked to document more income, deeper reserves, and higher credit scores. One underwriting area that hasn't tightened, however, is the maximum allowable loan size.