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When Fannie Mae, Freddie Mac and the Wall Street mortgage-backed securities machine all went the way of King Kong and Godzilla last year, that left just one home finance giant standing: the Government National Mortgage Association, or Ginnie Mae. Ginnie Mae bundles together mortgages into securities, and backs their sale to investors.

Ginnie Mae survived by sheer luck. It only guarantees mortgages insured by the Federal Housing Administration, and during the subprime craze FHA became irrelevant, backing barely 3 percent of all mortgages. But with subprime's demise, FHA lending has surged, insuring more than one-third of all new home loans. And suddenly Ginnie, an understaffed bureaucracy, has become an essential source of financing for home loans.

A new investigation from The Center for Public Integrity and Washington Post reveals the sorry result: Ginnie has funneled an estimated $100 billion to dozens of mortgage lenders with records of reckless and sometimes illegal business practices.

One of them, Lend America of Long Island, New York, is being charged by borrowers and regulators with failing to pay off old mortgages when it sold new ones, forcing borrowers to pay both mortgages or face foreclosure. Lend America, which also had a top executive with a mortgage fraud conviction on his record, received $1 billion in financing via Ginnie Mae. Other Ginnie Mae-backed lenders have excessively high foreclosure rates, often a sign that a lender made a loan it shouldn't have.

Reckless and fraudulent lending by companies approved to do business with FHA watch has been a problem for a while now - it's been a year since Business Week dubbed FHA "The New Subprime" - that has sent the agency's insurance reserves, financed with a fee on every mortgage, to dangerous lows. But as the Center for Public Integrity points out, Ginnie should have been a second line of defense against bad lenders. Instead, it waited for FHA to act - Ginnie cut off Lend America just last week, after FHA suspended it.

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