Fannie, Freddie Stocks Free-Fall As Privatization Plans Remain Unclear
Uncertainty over whether or not Fannie Mae and Freddie Mac will reprivatize has led to sharply lower stock prices in the last week for the two government-backed mortgage institutions, Bloomberg reported.
Shares of both government-sponsored enterprises have lost some 30% of their value within the past five days, as investors seemingly have grown impatient with President Donald Trump's pledge to restructure ownership of the two, according to Bloomberg.
The two stocks were the subject of a sell-off, with Freddie Mac falling to $3.45 and Fannie Mae dipping below $3.62 a share at the start of trading Thursday. Both rebounded somewhat later in the day but were still trading at least 60% below what they were at the start of the year.
A chorus of critics has derided the Trump administration and the Federal Housing Finance Agency — which oversees both Freddie Mac and Fannie Mae — for lacking a clear plan to resell shares to the public.
BTIG analyst Eric Hagen warned that shares of the agencies could face a “total unwind” without clarity about the future, especially after 10-year Treasury yields bounced upward this week, putting pressure on loan rates, Bloomberg reported.
Others fret the plan could backfire by scaring financial markets and driving up mortgage rates or create windfalls for investors who bought Fannie and Freddie stock at fire-sale prices during the 2008 housing crisis, many of whom are Trump donors, NPR reported in February.
Trump has been offering a variety of strategies in an attempt to combat high housing costs. Last month, FHFA Director Bill Pulte said the president deployed $200B of capital from the two mortgage companies to buy mortgage bonds in an effort to lower loan rates, Fox Business reported.
Trump has also proposed limiting institutional ownership of single-family homes and working with homebuilders to increase supply, according to Fox Business.
And last week, the president signed an executive order to direct the Consumer Financial Protection Bureau to tailor rules to allow smaller banks to provide more housing lending to consumers and more construction lending underwritten by community banks.
The order also requires the U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers to streamline the regulatory approval process on stormwater, wetlands and other water-related permitting to speed up infrastructure and development projects, according to Bloomberg.
