Two-thirds of the AAA-rated private private-label MBS purchased by Fannie Mae and Freddie Mae have been downgraded to "junk," the GSEs' regulator told a congressional panel, and only a small portion is still rated AAA.

Federal Housing Finance Agency director James Lockhart told a House Financial Services subcommittee the two government sponsored enterprises have $171.3 billion in PLS backed by Alt-A, subprime and other mortgages in their investment portfolios. Only 3% remain AAA and not on downward watch, Mr. Lockhart said.

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