Interesting that they thought they had the whole risk level thing down... I remember reading in Good to Great how they had been able to buy riskier mortgages and make a profit.
"While many stock analysts thought that, as the provider of home mortgages, Fannie Mae's success would be completely determined by the spread in changing interest rates, Collins tells us that Fannie Mae realized that the key to Fannie Mae's market-independent success was not in the ratio of profitability per mortgage. Rather, Fannie Mae could become the world leader in understanding mortgage risk levels and profit by insuring that risk. Fannie Mae's key ratio became profitability per mortgage risk level."
"While many stock analysts thought that, as the provider of home mortgages, Fannie Mae's success would be completely determined by the spread in changing interest rates, Collins tells us that Fannie Mae realized that the key to Fannie Mae's market-independent success was not in the ratio of profitability per mortgage. Rather, Fannie Mae could become the world leader in understanding mortgage risk levels and profit by insuring that risk. Fannie Mae's key ratio became profitability per mortgage risk level."
http://www.thinkinglike.com/Essays/Good-To-Great-Lessons.htm...