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Privatizing Fannie, Freddie Could ‘Mitigate’ Risks Caused by Government Intervention, Says GAO

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 Privatizing Fannie and Freddie would make it very difficult for the federal government to pursue housing and mortgage policies which favor one group--usually low-income borrowers--the report finds. This might not be a bad thing however, since Fannie and Freddie lost massive amounts of money on just those types of loans.
 
Fannie and Freddie “embarked on aggressive strategies to purchase mortgages and mortgage assets with questionable underwriting standards. For example, they purchased a large volume of what are known as Alt-A mortgages, which typically did not have documentation of borrowers’ incomes and had higher loan-to-value ratio or debt-to-income ratios.”
 
These Alt-A mortgages “served targeted groups” according to GAO, but also accounted for massive losses eventually covered by American taxpayers.
 
“Alt-A mortgages accounted for nearly half of Fannie Mae’s $27.1 billion in credit losses of its single-family guarantee book of business in 2008.”
 
Privatization, the report suggests, could prevent such a thing from happening again

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