The watchdog had previously issued the same findings in individual reports about Fannie, Freddie and the FHFA, but Tuesday's report is the first that details the collective scope of the abuse and fraud that has cost US taxpayers billions of dollars. One of the chief issues addressed in the report is Fannie and Freddie's failure to hold banks to strict underwriting standards required by law. This failure led to the collapse of thousands of failed mortgages, costing the federal government billions of dollars in the form of bailout funds for Fannie and Freddie, which would have collapsed with the assistance.
Between them, Fannie and Freddie currently own or guarantee about 31 million loans, about half of all outstanding US mortgages. They were seized in September 2008 by federal authorities, and now operate under a conservatorship overseen by the FHFA. Like many US banks, Fannie and Freddie grew complacent during the housing boom, failing to adequately check incomes and assets on the loans it guaranteed. As a result, the agencies did not force lenders to repurchase loans to borrowers that failed to meet underwriting standards, ultimately costing the government billions.
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