In this series, we take a look at the 25 stocks on the S&P 500 Index (SPX) that have turned in the worst performance during the past decade -- what went wrong, and what happens next.

Fannie Mae (NYSE: FNM) hardly needs an introduction -- along with her brother, Freddie Mac (NYSE: FRE), she's been grabbing headlines all over the place lately. As government-sponsored mortgage lenders, the siblings have been at the forefront of the endlessly unraveling subprime mess during the past year. But Fannie's problems started well before the word "subprime" entered the American lexicon.

What went wrong? At number 25 on our list of S&P 500 laggards, Fannie shed 68% from June 30, 1998 through June 30, 2008, when the stock closed at $19.51. In fact, she's been bleeding value consistently since her December 2000 peak at $89.38. So, what happened? A New York Times article dated December 3, 2000, puts it like this: "More home buyers will be able to secure cheaper loans next year because Fannie Mae and Freddie Mac ... are raising the limit on the size of home mortgages they buy from banks. Under the new limit, 150,000 more families will be eligible for the lower-cost loans in 2001."

A year after this blurb was published, our friend Fannie announced that she had committed to buying a record $49 billion in mortgage loans -- and the U.S. slipped into an economic downturn. During the next several years, regulatory outcry about the accounting practices at Fannie Mae and Freddie Mac overshadowed concerns that the gruesome twosome may have become dangerously oversized and precariously leveraged.

What next? Fannie Mae hasn't abandoned her propensity for sharp sell-offs. Most recently, a Lehman Brothers analyst sent the stock reeling when he warned that a proposed change to accounting rules could leave Fannie and Freddie severely strapped for cash. Federal regulators -- and opposing analysts -- dismissed this commentary as unfounded, and some on Wall Street even cited a buying opportunity following the plunge.

In the days that have followed, rumors of Fannie's (and Freddie's) collapse, or impending government bailout, were floated, reported, dismissed, denied, and revived with clockwork regularity. Most recently, the House of Representatives passed a "rescue" package that would allow the Treasury to raise its line of credit on Fannie and Freddie, and buy equity in them as needed. For our part, we're not yet sure whether Fannie looks affordable at its current levels, or just plain cheap. Even as contrarians, it seems a bit of a stretch to assume that mortgage lenders will lead the economic recovery.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the weekly video series Option Basics on SchaeffersResearch.com.