logo  
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

Fannie and Freddie Are Now Wildly Profitable…But That Still Might Not Save Them

  +Follow June 20, 2013 9:15AM
Share:
Tickers Mentioned:

Fannie MaeFannie Mae (FNMA) and Freddie Mac (FMHC) aren’t a money pit anymore. But that might not be able to save them from being dissolved. Thought two of the most infamous names associated with the housing crisis are beginning to see a profit – and might even be able to pay back the federal government – the possibility of them eventually returning to private status remains slight.

Yesterday the Federal Housing Finance Agency (FHFA) upgraded the two companies from having “critical concerns” to only having “significant concerns.” citing their 2012 profits of $17 billion and $11 billion, respectively. While a classification like “significant concerns” on such robust numbers might seem to be damning with faint praise, it’s a huge step for the two embattled housing companies. Still, the government is still more than a little wary of the prospects of their two exceptionally famous wards.

Senators  Mark Warner and Bob Corker are currently working on a bill that would put the companies into receivership, and put into place a new system in which private entities would purchase mortgages from lenders and issue them to investors as securities. If passed, Fannie and Freddie would be done with. And shareholders would get little to nothing.

The government certainly never expected Fannie and Freddie to rebound, and is still skeptical on their future. The 2008 bailout of the companies was itself only a preventative measure and not an investment strategy.  So now the question is, will Fannie and Freddie ever return to privatization and reward their investors? Or will the companies be unceremoniously shuttered?

Let’s look at the particulars of the stocks of both companies, and their future going forward.

Fannie Mae

Fannie had its best year ever in 2012, and the stock has been responding in kind. Falling to as low as 20 cents a share at one point last year, Fannie currently sits at $1.83 (following a dramatic spike to $5.44 last month after the first reports of record profitability.) Fannie has traded heavily, averaging 53.75 million shares in volume a day.

Freddie Mac

Freddie didn’t do quite as well as Fannie, but still posted monster profits. And the behavior of Freddie’s stock has closely mimicked Fannie: it currently sits at $1.70 a share. And Freddie likewise experienced a frenzied spike in May, raising to $5.00 a share in May before coming back to Earth. Trading has been more modest than with Fannie, though still heavy at 22.73 million shares a day.

The Future of Fannie and Freddie Stock

Stockholders in Fannie and/or Freddie want to see a return. In fact, a group of stockholders recently filed suit against the federal government, alleging that the takeover was illegal and that the government is unjustly seizing their property (the shares and theoir profits.) The fact that under the currently structured deal Fannie and Freddie are required to send all of their profits to the government, and not pass them onto investors, further rankles them.

The lawsuit brings up an interesting Constitutional dilemma. The government can’t seize private property without “just compensation.” But a government sponsored entity like Fannie might not qualify as private property, and thus the government won’t be beholden to shareholders at all. Though the case is sitll being considered, legal pundits expect the courts to rule as such.

All this uncertainty has led to behavior in the stocks that is erratic as the day is long. As mentioned above, a dramatic spike in May saw both stocks double in value before crashing back down. This volatility is one of the reasons the government is suspicious of ever letting Freddie and Fannie out of their conservatorship. The status of a government sponsored entity as a stock is difficult to truly value. And their position in a housing market that's far from recovered further colors the perception that neither company is truly stable.

The Problem of Perception

Another reason we might never see Fannie and Freddie privatized again – even if they pay back the bailout – is their ugly public perception. Besides AIG (AIG), Fannie and Freddie are the two names most associated with the housing crisis. And public perception still tends to lean towards the sentiment that these two companies cannot be trusted on the free market.

Considering the government owns 80 percent of Fannie and Freddie, investors put their money into these companies at their own peril. And the way the bailout was structured, common shareholders won’t see a penny before preferred shareholders are repaid. So even though on paper Fannie and Freddie are wildly popular, and upset investors want to see a return on their investments, the idea that Fannie and Freddie could ever return to what they once were is a farfetched one indeed.  

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


Liked What You Read? Join Equities.com and Connect With Your Favorite Financial Experts FOR FREE! Members of Equities.com gain access to our leading financial news and content, active social investment community, proprietary research tools including the 2014 Small-Cap Stars, E.V.A. reports and more.

Results for fnma
Investors Hangout
18 Dec 14 14:16:23
$OCFN Short Sales Updated Thursday, December 18, 2014 4:42:51 PM $NTEK $ECIG $GRCV $FNMA http://t.co/D5322Q8jks
Investors Hangout
18 Dec 14 14:16:22
$AZFL Investor Opinions Updated Thursday, December 18, 2014 4:42:51 PM $FNMA $DNNC $HAS $PLKD http://t.co/q4fc5zMzkJ
Investors Hangout
18 Dec 14 14:16:21
$XTRN News Updated Thursday, December 18, 2014 4:42:51 PM $FONU $NTEK $GTATQ $FNMA http://t.co/KZVqVtrE5n
Stock Forums
18 Dec 14 14:16:12
$FNMA Stock Price Updated Thursday, December 18, 2014 4:41:23 PM $ITVI $CTIX $NHMD $ITKH http://t.co/TIIUcfpxf7
Stock Forums
18 Dec 14 14:16:11
$GTATQ News Updated Thursday, December 18, 2014 4:41:23 PM $IWEB $PLKD $FNMA $PZOO http://t.co/esMK8S31Tl
Stock Forums
18 Dec 14 14:16:10
$DNNC Stock Price Updated Thursday, December 18, 2014 4:41:23 PM $MINE $GRDO $DRAG $FNMA http://t.co/8BzZl9FR6a
deafdaytrader
18 Dec 14 14:05:58
Past stocks might go $CGRA $CDVI $MCP $BKEN $GSS $SFRX $LLLI $MAUXF $THNS $PWE $FNMA $VIP $GFI $HERO $KEG $GGB $PLUG $SFY $EOX $GASL $FMCC
Glen Bradford
18 Dec 14 14:03:59
@equityaddict @FamilyOfficeGur Honestly CC Debt is like 12%-30% I have no idea... but $FNMA is 100% IRR so it's no contest.
Glen Bradford
18 Dec 14 14:03:09
@equityaddict @FamilyOfficeGur Priority right now is $FNMA and that will put me 7 figures. Get CC debt you wuss.
Stockaholics
18 Dec 14 14:00:40
Platinum Memberships Rose, After 528% Gains On Penny Stocks, In One Month! Big Update: http://t.co/2W3yKD2d5Q $TRTC $FNMA $MINE
Glen Bradford
18 Dec 14 13:55:57
@equityaddict @FamilyOfficeGur I am considering homelessness a la couch surfing and mustache rides for more $FNMA TL;DR my last 4 months.
InvestorsHeadquarter
18 Dec 14 13:40:51
Posting Every Other Day Stocks / Options Alerts On http://t.co/nCa3DNyM2I Check it 100% FREE $AAPL $SPY $BABA $GPRO $FNMA $FB $TWTR $TVIX
Investors Hangout
18 Dec 14 13:15:12
$ITKH Percent Change Updated Thursday, December 18, 2014 3:42:55 PM $FNMA $GTPH $CEO $XTRN http://t.co/ReiUiuN7td
Investors Hangout
18 Dec 14 13:15:11
$CGRA News Updated Thursday, December 18, 2014 3:42:55 PM $DNNC $GRCU $TRTC $FNMA http://t.co/62oUpUNVoz
Investors Hangout
18 Dec 14 13:15:09
$HAS Last Price Updated Thursday, December 18, 2014 3:42:55 PM $ITKH $FNMA $ITVI $MINE http://t.co/ZgqGi6RpiW
Investors Hangout
18 Dec 14 13:13:39
$IWEB Reviews Updated Thursday, December 18, 2014 3:44:22 PM $FNMA $AVEW $MINE $EDXC http://t.co/HIynDylCU4
OTC Markets Group
18 Dec 14 13:05:00
Most Active #OTCQB Stocks ($Vol M) | $SNYNF $65.2 | $FNMA $10.4 | $RYDAF $7.5 | $STOHF $7 | $FMCC $5.2 | http://t.co/Cv2Z5JU6Pv
ValueWalk
18 Dec 14 13:01:24
Fannie Mae Appeal Issues Presented to Appellate Court http://t.co/3glovPCM2z $FNMA $FMCC
ShareholderRights
18 Dec 14 12:59:38
ShareholderRigh: Candice_Realtor: #FannieMae announces new 3% down #mortgage program. Read about it here: http://t.co/JdGIDbDaI3 $FNMA ...
ShareholderRights
18 Dec 14 12:43:41
Candice_Realtor: #FannieMae announces new 3% down #mortgage program. Read about it here: http://t.co/JdGIDbDaI3 $FNMA ...
Chasing Stars
18 Dec 14 12:38:39
$FNMA Last Price Updated Thursday, December 18, 2014 2:46:20 PM $CUBA $DSCR $GTPH $GRCV http://t.co/mIlAMyKlNH
Chasing Stars
18 Dec 14 12:38:36
$DNNC Investor Opinions Updated Thursday, December 18, 2014 2:46:20 PM $PLKD $TRTC $FNMA $AVEW http://t.co/2BExBAU3Cb
Official Lion Pack
18 Dec 14 12:32:55
$GLGT is 86% down but resembles $CRMBQ when it nose dived to .02 then the next day to .60cents $redg $fnma $ecig $udhi $Itvi $thcz $hihi
Trader News Daily
18 Dec 14 12:29:36
Wow http://t.co/PeRPkZkWiw just posted last weeks results. +429%. Crazy. They offer a free trial too. $NETE $FNMA $CIG $EGO $DNDNQ
rick danial
18 Dec 14 12:25:43
$FNMA http://t.co/5woLW5CLIX
rick danial
18 Dec 14 12:21:02
$FNMA http://t.co/u3T1ZOaqSA
Etos Etana
18 Dec 14 12:19:43
RT @IHPosts: $FNMA Short Sales Updated Thursday, December 18, 2014 2:43:24 PM $PGSY $OWOO $NTEK $CGRA http://t.co/P3PFmVdESx
Todd Sullivan
18 Dec 14 12:16:42
GSE Appeal Issues Presented to Appellate Court - http://t.co/O1qehwDxza $FNMA $FNMAS
David P. Sims
18 Dec 14 12:14:29
RT @Fairlight_Cap: $FNMA Fannie Mae: the Audacity of Growth. Using our math we get a valuation range of $27 to $37 http://t.co/QlfM6qrMsj
Investors Hangout
18 Dec 14 12:14:21
$FNMA Short Sales Updated Thursday, December 18, 2014 2:43:24 PM $PGSY $OWOO $NTEK $CGRA http://t.co/P3PFmVdESx
Investors Hangout
18 Dec 14 12:12:15
$ONE Investor Opinions Updated Thursday, December 18, 2014 2:44:52 PM $EDXC $DNNC $FNMA $ITVI http://t.co/8ad8J22zMF
ValueWalk
18 Dec 14 12:02:04
Gridlock Grows Over Fannie Mae, Fannie Mac Reform http://t.co/mf96kvMwjE $FNMA $FMCC
OTPicks.com
18 Dec 14 11:43:22
http://t.co/NYsxQOU64w DennyT: HAS Investopedia $HAS $ITKH $HAS $FNMA $GNCP Buy: DennyT http://t.co/Bf3mKS2JHp http://t.co/NYsxQOU64w
Fairlight Capital
18 Dec 14 11:39:45
$FNMA Fannie Mae: the Audacity of Growth. Using our math we get a valuation range of $27 to $37 http://t.co/QlfM6qrMsj
Chasing Stars
18 Dec 14 11:37:35
$GDGI Percent Change Updated Thursday, December 18, 2014 1:45:50 PM $UNGS $GTATQ $ECIG $FNMA http://t.co/XPrYhuiPRZ
Naomi Frances
18 Dec 14 11:33:02
@thebigfatJ @QuoththeRavenSA @mattintoronto let's give a shout out for $FNMA ... uh uh $HLF Pershin suing the USA man. dat bad. Ack cwazy
Investors Hangout
18 Dec 14 11:26:09
DennyT: HAS Investopedia $HAS $ITKH $HAS $FNMA $GNCP Buy http://t.co/j0lEy30pWo
Investors Hangout
18 Dec 14 11:26:09
DennyT: HAS Investopedia $HAS $ITKH $HAS $FNMA $GNCP Buy http://t.co/4hKeyElkNO
Investors Hangout
18 Dec 14 11:13:41
$FNMA News Updated Thursday, December 18, 2014 1:42:54 PM $CTIX $GDGI $PLKD $ITVI http://t.co/3TuXdvjPwL
Investors Hangout
18 Dec 14 11:11:41
$DNNC Filings Updated Thursday, December 18, 2014 1:44:22 PM $ECIG $GTATQ $NHLE $FNMA http://t.co/fBb7Z1hCZ0
Bilo Selhi
18 Dec 14 11:11:39
RT @YoshidaSauce: @StocksThatDoubl Stock Alerts helped me profit on $FNMA (in at $2.24 out $2.34) See his track record here: http://t.co/4J…
iHangout
18 Dec 14 11:08:42
DennyT: ALERTS, HOT STOCKS & CHARTS: HAS Investopedia $HAS $ITKH $HAS $FNMA $GNCP Buy http://t.co/em2mZm0b8z
Investors Hangout
18 Dec 14 11:08:37
chartguy89: GTPH Stock Chart $GTPH $FNMA $ECIG $AZFL http://t.co/LNy35sJ2tB
Investors Hangout
18 Dec 14 11:08:36
chartguy89: GTPH Stock Chart $GTPH $FNMA $ECIG $AZFL http://t.co/dc6sMtyWT1
Investors Hangout
18 Dec 14 11:08:16
Emylers: $FNMA Up to date company activities and other http://t.co/t6sWIUQZG9
Investors Hangout
18 Dec 14 11:08:13
Emylers: $FNMA Up to date company activities and other http://t.co/6MI9oIpbi5
DennyT
18 Dec 14 11:07:48
HAS Investopedia $HAS $ITKH $HAS $FNMA $GNCP Buy or Sell Opinion,Stock Chart,Close,Company News,On Radar Stock http://t.co/anLbmXTbWy
D B
18 Dec 14 11:00:54
RT @SimsOnFinance: "Sweep continues.. despite the fact that $FNMA & $FMCC have now paid back $40 billion more than they were loaned." http:…
D B
18 Dec 14 11:00:33
RT @SimsOnFinance: Perpetual conservatorships & Treasury sweeps are a violation of every principle of insolvency law. $FNMA $FMCC http://t.…
chartguy89
18 Dec 14 10:58:19
GTPH Stock Chart $GTPH $FNMA $ECIG $AZFL http://t.co/uSq4H9f1k5 http://t.co/TCMamYC2KG
				
				
  +Follow June 20, 2013 9:15AM
Share:

Comments

 

blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.