In a letter today to ranking committee members in both the US Senate and House of Representatives, Edward DeMarco, the acting director of the Federal Housing Finance Agency (FHFA), said that his institution concludes that losses on private label mortgage-backed securities from 2005, 2006 and 2007 at Fannie Mae (FNM) and Freddie Mac (FRE) are directly responsible for the FHFA taking an oversight role in 2008. Furthermore, credit losses on MBS investments in years prior to conservatorship will likely continue for years. "Investments in private-label MBS were primarily responsible for eliminating Freddie Mac’s preconservatorship net worth of $27bn and played a significant role in the initial draws under the Preferred Stock Purchase Agreements," the letter states. "Given that Fannie Mae had less than half the amount of private-label MBS as Freddie Mac, the overall impact was similar but less severe." In 2009, the government-sponsored enterprises' (GSEs) losses totaled $93.6bn, and draws under the preferred stock agreements associated with those losses totaled $66.1bn. The letter should come as no surprise, as this area is the core business of the two GSEs. Since FHFA takeover, DeMarco said that underwriting standards have tightened accordingly. "Serious delinquency rates for the 2009 vintage are a fraction of the serious delinquency rates for the 2006-2008 vintages at comparable periods after origination," he reports. Write to Jacob Gaffney. The author holds no relevant investments.