WASHINGTON, April 9 (UPI) -- Conflicting goals for mortgage giant Fannie Mae led to its downfall and eventual rescue by the U.S. government, its former chief says.
Daniel Mudd told a congressional commission Friday the quasi-governmental mortgage finance agency was meant to promote affordable housing but also had to generate profits for shareholders, McClatchy Newspapers reported.
Both goals could be met when home prices were rising, Mudd said, but proved problematic when home values collapsed by more than 30 percent.
When home prices fell, Fannie Mae, which bought mortgages originated and underwritten by others, was unable to diversify or minimize the risks it faced, Mudd testified.
"The lack of diversification left (Fannie Mae) exclusively exposed to the one market that cratered the worst," Mudd told the Financial Crisis Inquiry Commission.
Fannie Mae and its companion agency, Freddie Mac, own or back nearly half of America's $11 trillion in home mortgages.
Fannie Mae was placed in government conservatorship in September 2008.
