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