Editor's Note: This article was originally published on RealMoney.com in October of 2002.In my last article I wrote a little about the Fannie Mae situation and the risks potentially growing there. I say potentially because we don't all agree on the matter. I got a nice email from the people at Fannie Mae, stating their side of the story, which I will share later in the column. Fannie Mae is a government-sponsored enterprise, and that status provides the company with certain privileges. Fannie is exempt from Securities and Exchange Commission requirements, as well as state and local taxes, saving the company billions of dollars annually. Additionally, the company can borrow at lower interest rates than conventional banks, and it also enjoys a $2.25 billion line of credit from the Treasury Department in case of economic difficulty. Furthermore, the Federal Reserve has the legal authority to purchase the debt of housing-related government-sponsored enterprises such as Fannie Mae. So if anything goes wrong, we, the taxpayers, will be the ones to bail them out. They keep their profits, but we share their risk. These safety nets have made Fannie Mae very attractive to investors. As our equities markets have crashed, investors have poured money into bond funds, especially those holding government-backed mortgage securities. This year, more than $16 billion has moved into mortgage-backed funds according to AMG Data Services, which tracks mutual-fund flows. Mortgage-backed bond funds have gained an average of 6% for the year, and over the past five years they've outperformed Treasury bond funds. But there are some risks looming that we as investors, and taxpayers, should be aware of.