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September 2008. Th e reason for this nearly reckless behavior is obvious—they were
still subject to the AH goals, which were increasing through this period. If they had
only acquired these NTMs to compete with Countrywide and others for market
share the competition was already over; their competitors had abandoned the fi eld.
But the fact is that Fannie did not—or could not—increase its market share between
2004 and 2006 shows without question that market share was not the reason they
had acquired so many NTMs by the time they failed in September 2008.
Beleaguered by accounting problems, suff ering diminished profi tability, and
lacking the capability to evaluate the risks of the new kinds of mortgages they would
have to buy, Fannie had no option but to stay the course they had been following for
15 years. Th e NTMs they bought during the period from 2004 to 2007 were acquired
to comply with the AH goals and not to increase their market share—as much as
Fannie might have preferred to do so. Fannie’s market share fi nally did increase in
2007, when the asset-backed market collapsed, Countrywide weakened, and neither
Countrywide nor anyone else could continue to securitize mortgages. In a report
to the board of directors on October 16, 2007, Mudd reported that Fannie’s market
share, which was 20 percent of the whole market at the beginning of 2007, had risen
to 42 percent. 113
Th at leaves one other possibility—that Fannie and Freddie were buying
NTMs because they were profi table. Th at issue is addressed in the next section.

Did Fannie acquire NTMs because these loans were profi table?
From time to time, commentators on the GSEs have suggested that the GSEs’
real motive for acquiring NTMs was not that they had to comply with the AH
goals, but that they were seeking the profi ts these risky loans produced. Th is could
have been true in the 1990s, but aft er the major increase in the AH goals in 2000
Fannie began to recognize that complying with the goals was reducing the fi rm’s
profi tability. By 2007, Fannie was asking for relief from the goals.
Th e following table, drawn from a FHFA publication, shows the applicable
AH goals over the period from 1996 through 2008 and the GSEs’ success in meeting
them.

113 Fannie Mae, Minutes of a Meeting of the Board of Directors, October 16, 2007, p.18.