Market Overview

Why Fannie And Freddie Have A Path To Survival

Why Fannie And Freddie Have A Path To Survival
Related FNMA
These Were The 10 Most Actively Traded OTCQX and OTCQB Securities In November
Tariffs, Drug Prices, Legislative Gridlock: What Economists Are Watching Following The Midterm Election
GSE Stocks Moving On New FHFA Director Otting Comments (Seeking Alpha)
Related FMCC
These Were The 10 Most Actively Traded OTCQX and OTCQB Securities In November
The Home Affordable Refinance Program Is Ending Again, For Real This Time
GSE Stocks Moving On New FHFA Director Otting Comments (Seeking Alpha)

While most U.S. companies are hoping for an earnings boost from tax reform, Federal National Mortgage Association (OTC: FNMA) and Federal Home Loan Mortgage Corp (OTC: FMCC) are simply hoping to survive. According to one analyst, reports on a newly-drafted Senate housing finance reform bill are good news for Fannie Mae and Freddie Mac investors.

The Analyst

Height Securities analyst Edwin Groshans.

The Thesis

Groshans says the current draft of the housing finance bill allows Fannie and Freddie to continue to exist in conservatorship until other competitors enter the MBS guarantee market.

“This development is a positive for GSE shareholders and we have an encouraging outlook on the probability of passage of a bill as Treasury Secretary Steven Mnuchin, Senator Bob Corker (R-TN), and House Financial Services Committee Chair Jeb Hensarling (R-TX) appear to be working together to develop or support bipartisan housing finance reform legislation,” Groshans wrote Thursday.

Details on the bill are still unknown at this point, but Groshans said it appears as if Fannie and Freddie may be allowed to exit conservatorship at some point down the line. Treasury Secretary Steven Mnuchin has said housing finance reform will be a top priority of the current administration in 2018.

In November, Bloomberg reported the Treasury has been discussing having Fannie Mae and Freddie Mac retain a portion of the fourth-quarter dividend payments in an effort to begin recapitalizing the government-sponsored enterprises.

Fannie and Freddie have about $7 billion in dividend payments due to the Treasury by the end of the year, but Bloomberg reported they may be allowed to retain $2 to $3 billion, another positive step for Fannie and Freddie investors.

Price Action

Despite the potential positive developments, the market seems to have little optimism for Fannie and Freddie at this point. Both stocks are down more than 2.3 percent in the past month and are down more than 23 percent year-to-date.

Related Links:

Fannie And Freddie Watch: The Latest News Out Of Washington

Bill Ackman: Fannie, Freddie Have Increasing Odds Of A Positive Resolution

Posted-In: Edwin Groshans fannie mae freddie macAnalyst Color Politics Top Stories Analyst Ratings General Best of Benzinga


Related Articles (FMCC + FNMA)

View Comments and Join the Discussion!

Latest Ratings

CGBDJP MorganUpgrades15.5
NLYJP MorganUpgrades10.5
NTNXMorgan StanleyUpgrades58.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Botox Competition Spurs Argus To Downgrade Allergan

Tax Bill Uncertainty, Potential Gov't Shutdown Appear To Put Markets On Pause