<P> The GSE business model has outperformed any other real estate business throughout its existence . According to the Annual Report to Congress, filed by the Federal Housing Finance Agency, over a span of 37 years, from 1971 through 2007, Fannie Mae's average annual loss rate on its mortgage book was about four basis points . Losses were disproportionately worse during the crisis years, 2008 through 2011, when Fannie's average annual loss rate was 52 basis points . Freddie Mac's results are comparable . </P> <P> By way of contrast, during 1991--2007, commercial banks' average annual loss rate on single - family mortgages was about 15 basis points . During 2008--2011, annual losses were 184 basis points . </P> <P> The FHFA study compares, on an apples - to - apples basis, GSEs loan originations with those for private label securitizations . The study segments loans four ways, by adjustable - rate mortgages (ARMs) - versus - fixed - rate, as well as by vintage, by FICO score and by loan - to - value ratio . In almost every one of 1800 different comparisons covering years 2001 through 2008, GSE loan performance was exponentially better . On average, GSE fixed - rate loans performed four times better, and GSE ARMs performed five times better . </P> <P> However, other critics in D.C. claim that the GSE business model faces inherent conflicts due to its combination of government mission and private ownership . The GSEs were given monopoly privileges against which private enterprise could not compete . Both GSEs had a line of credit with the US Treasury Department, and both GSEs were exempt from state and local income tax on corporate earnings . The GSEs were the only two Fortune 500 companies exempt from regulation by the Securities and Exchange Commission . Because of implicit government backing, Fannie Mae discount notes became the second - largest short - term notes issued (second only to Treasury bills). </P>

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