Ask a Fool: What's Up With Fannie Mae and Freddie Mac?

In the following video, Motley Fool financial analyst Matt Koppenheffer takes a question from a Fool reader on Facebook, who asks, "What is actually going on with Fannie Mae (NASDAQOTCBB: FNMA  ) and Freddie Mac (NASDAQOTCBB: FMCC  ) ?"

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  • Report this Comment On June 20, 2013, at 8:59 PM, Caludio wrote:

    If you really want to know what is going on with Fannie and Freddie you should read the complain filed by the shareholders on Jun 10 2013 in the Federal Court .You can download it

    pasting in you browser this url

    http://dealbook.nytimes.com/2013/06/17

    and then look for the article about Fannie and Freddie.

    Also if you are serious about this issue is convenient to read the book "On the Brink" by former Treasury Secretary Henry Paulson

    After reading the class action complaint filed by Hagens Berman in the Federal Court I think that sooner or later the Court will stop the payments from Fannie and Freddie to the Treasury.

    On that day the shares will rocket up big time.

    Fannie's Estimate of intrinsic value by DCF

    The last Free Cash Flow reported by Fannie is

    $37B , lets be extremly conservative, lets go back to the FCF of 2001 that was $14B and use it as initial CF, annual growth rate of 5%, terminal growth rate 3%, discount rate 8%, and to be even more conservative lets use the fully diluted shares 5.7 billions (including the warrants that the government maybe will not be allowed to exercise after it gets paid) .

    The resultant intrinsic value per share is $59.28. Today's price is $1.90

    So the upside potential is enormous. I don't own these shares yes but I will.

  • Report this Comment On June 20, 2013, at 10:18 PM, goblin9773 wrote:

    imo....with an investor like bruce berkowitz involved....i doubt these "investors" are speculating anything....bruce berkowitz ....he becomes very involved with his investments......remember...frank-dodd...One provision on which the White House did not take a position[19] and remained in the final bill[19] allows the SEC to rule on "proxy access" – meaning that qualifying shareholders, including groups, can modify the corporate proxy statement sent to shareholders to include their own director nominees, with the rules set by the SEC. This rule was unsuccessfully challenged in conference committee by Chris Dodd, who – under pressure from the White House[20] – submitted an amendment limiting that access and ability to nominate directors only to single shareholders who have over 5% of the company and have held the stock for at least two years.....if i am correct in understanding that the stock warrants that the gov holds, have no voting rights, then that means that at least one billionaire has just bought 5% of common....5% of 2.4 Billion = 120 million..=(at $2 average)60 million shares which is 5% of common.....how many billionaires are going for this???maybe this stock has long term value?

    if i am wrong please correct me as i am guessing...thank you

  • Report this Comment On June 20, 2013, at 11:21 PM, TMFKopp wrote:

    @goblin9773

    I highly recommend that you read Fannie Mae's latest 10-K -- at the very least the first page. The company is in conservatorship and as part of that has no fiduciary duty to shareholders... or really anyone else besides the government.

    Also, take note that what Berkowitz and most hedge funds have been buying are the company's preferred stock, not the common.

    Matt

  • Report this Comment On June 20, 2013, at 11:33 PM, TMFKopp wrote:

    @Caludio

    I see what you're going for, but financial companies like Fannie Mae don't lend themselves to DCF analysis for valuation. You're better off going for a multiple-based approach.

    Also, I'd suggest that you give some weight to the possibility of the government winding down Fannie and common shareholders getting nothing. The way you'd do that is figure out what you think shares would be worth if they were in private hands, multiply that by the inverse of your "government zero" probability, and you've got a better approximation of what shares are worth today.

    For example (using random numbers), if you think shares would be worth $10 if they were in private hands now and you think there's a 60% chance that the government winds it down and gives common holders $0, then you'd say that shares are worth $4 today.

    There are many other factors to play around with, but that's a key piece of the puzzle.

    Matt

  • Report this Comment On June 21, 2013, at 12:19 AM, Gaubel wrote:

    Well, you are learning, Matt and that is a good sign. What you can also learn is that "government" is not an entity that walks around doing things like a human being. The "government" in this case can only refer to two agencies and their leading officials. The first is the FHFA, which is an independent federal agency led by Acting Director Ed DeMarco. The second is the US Treasury, an executive federal agency, led by Jacob Lew. Only these two agenices can directly act on the GSEs.

    How so?

    Since the FHFA manages the conservatorship under the aegis of Ed DeMarco as was established in a statutory grant made by Congress through HERA 2008, neither the lawmakers of the Senate or House, the President, nor Secretary of the Treasury can directly intervene in the activities of the FHFA and prevent Ed DeMarco from doing as he has done and doing. DeMarco has the full authority and power to run the FHFA as directed by law and he is not beholden to any other political figure or agency of government in doing so. That is the nature of an independent federal agency.

    So, it is given to DeMarco by statutory law that he can take actions in the FHFA that count as federal law. He is in charge.

    So you see there is no "government" doing what you you have imagined. That abstraction of "government" is simply that, an empty abstraction that has no weight or meaning. Ed DeMarco is the government in this case along with Jacob Lew. All others, from the President to policymakers of the Congress are sidelined.

    The President can nominate or designate a Director or successor to the position of the Director and various enterprises and that is all he is granted by law. He can try to bring influence personally or through Jacob Lew but as all in the know know, DeMarco has publicly defied the White House and the Democrat's agenda. The Congress too is quite powerless. Republican policymakers have made over dozen bills, none of which can have one whit of effect on the operation of the FHFA and its direction.

    Most journalists and formative pundits do not know this. And so it is blindly believed that these bills as presented have meaning and weight and mindlessly repeat political mantras without knowing how they have been played by their own ignorance or politicians manuevering the press into their camp.

    These bills have no bearing or impact whatsoever against an independent federal agency's Director or the agency he/she directs. Only if the Director personally takes a partisan political view and succumbs to that can that happen rather than to follow statutory beat of the law. And so, by rule of the law, the President is nominating Melvin Watts as the new Director of the FHFA and he must wait to see if the Senate confirms him, since the President has no direct control over the FHFA and neither does the Senate.

    Smoke and mirrors Matt, and you guys at the Motley Fool, Bloomberg, The Street, CNBC, etc. are simply running around in it without knowing you are snookered.

    Take some time to research the structure of the US government, to know what an independent federal agency is and how it is made and functions and how in this case (and most cases) is not unilaterally subject to any official or agency of officials except those given by law. Then, in doing so, the politics of the GSEs will come to make sense instead of the confusing morass of misinformation it has come to be.

    You are looking good Matt. Really. You are now heading towards presenting a balanced, intelligent view. Keep it up! Take the lead at in presenting accurate, informative information in the same style. Your career will take a leap forward.

    Here is a link to HERA 2008. Take some time to look at it.

    http://www.govtrack.us/congress/bills/110/hr3221/text

  • Report this Comment On June 21, 2013, at 1:42 AM, notafool2013 wrote:

    Apple almost filed bankruptcy before Steve Job went back to Apple. You can always play safe by keeping cash. What is the risk here? I don't see much. Just treat this as a stock option without a expiration date. It is just $2 per share.

    You have a much better chance here than winning a lottery. Are you going to tell those lottery winners that they are fools because the probability of winning is so low? Be brave! No guts, no glory! What is the probability that that Fannie Mae can survive? It is probability much much higher than winning a lottery.

    No one knows about the future.The question is if you are going to regret that you have tried it or regret that you have not tried it twenty years later. What is the risk here and what is the return here? You control your own destiny!

  • Report this Comment On June 21, 2013, at 2:45 AM, Gaubel wrote:

    Matt,

    Is the conservatorship permanent or temporary?

    Answer: Temporary

    Can the FHFA or the US Treasury liquidate the GSEs without cause?

    Answer: No.

    So what does that mean for your answers to @goblin9773?

    The answers you provide are speculative and not a permanent fact. The conservatorship will end at some time in some manner. You or I have no idea when that will happen and what will happen.

    So, is it a bit presumptuous to insist that "The company is in conservatorship and as part of that has no fiduciary duty to shareholders... or really anyone else besides the government?"

    That statement would be true if the conservatorship is a permanent status. But it is not permanent...so that is simply misinformation. It is an open question, but you seem tp wnat to close it despite the facts...

    Also, please do more complete research. It was reported that Berkowitz invested 90-95% of 2.4 billion dollars par value in the GSEs preferred stock and the rest in the common. That amounts to 25 to 50 million dollars (500 million investment)

    You said to @goblin9773, "Also, take note that what Berkowitz and most hedge funds have been buying are the company's preferred stock, not the common."

    That is simply not true. Another innaccurate statement made.

    Here is a quote what was reported:

    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~

    Fairholme said it has a $2.4 billion investment in the two companies, whose common and preferred shares have surged this year amid a market-wide embrace of riskier assets. Fannie common shares rose 20% Monday to $2.53 and one preferred share series rose 18%.

    Hedge funds have been lobbying Congress to restore the dividend, which was suspended last year. Although Mr. Berkowitz has not done so yet, he plans to join those efforts, he said in an interview Monday with The Wall Street Journal. To him, restoring the dividend is just “the right thing to do.”

    Purchased largely this quarter, the Fairholme position is about 90% to 95% preferred stock with the remainder in common stock. He said the shares are split proportionally between the $8.2 billion Fairholme Fund and the $311 million Fairholme Allocation Fund.

    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~

    "with the remainder in common stock."

    Please report accurately or we will simply believe that you make things up as you go along.

    See: http://blogs.wsj.com/moneybeat/2013/06/03/bruce-berkowitz-pl...

    http://www.marketfolly.com/2013/06/bruce-berkowitzs-fairholm...

    http://www.reuters.com/article/2013/05/29/us-usa-fannie-fred...

  • Report this Comment On June 21, 2013, at 7:50 AM, msimons4 wrote:

    1. If the government gets rid of Fannie Mae then based on the way things are today:

    Private investors will not invest their money unless they have some guarantee.

    So they will have to insure their investment and that will:

    1. Raise interest rate of mortgages, Jumbo loans are about 1.4% higher for a comparable 5/1 arm, with tighter lending standards i.e. 38% vs. 43% D/I ratio, and we are in a housing crises at the current rates.

    2. Still make the government responsible since there is no insurance company that can handle that much money. We saw this when the government had to bail out AIG from the last housing downturn.

    2. The government has reduced the risk to tax payers by making loans more solid and they have with:

    1. High credit scores

    2. 80% loan to value.

    3. 43% debt to income ratio.

    4. LLPA (Loan Level Price Adjustment) on 30yr. fixed

    5. AMDC (Adverse Market Delivery Charge)

    6. Banks are doing their due diligence making sure the numbers check out on the borrower’s ability to pay back the loan.

    7. Borrowers will now longer be sold loans like interest only and reverse amortization that were predestined to fail.

    3. The government stands to do well if Fannie does well since they also has an investment in Fannie Mae with $118 billion in preferred and 4.6 billion shares of the common and Fannie Mae is doing well:

    1. 8.1 billion net income last quarter.

    2. Microsoft, the 3rd largest company by market cap, reported $6.06 billion net income for the same period.

    When the government originally took over and placed Fannie Mae in a conservatorship, they were charging a 10% dividend on the money that they loaned. Then the government changed the terms of the contract from charging a 10% dividend to keeping the entire profits and this brings up the question:

    1. Do they have certain responsibilities as a conservator with respect to not keeping the entire net income which could be ferreted out in a court of law?

    When the government first took over Fannie Mae and charged them a 10% dividend, the stock traded around .30 cents. Then when they changed it to charging them the entire net income, it traded to .20 cents. The government position is no different now than when the stock traded at .20 cents. The difference now being when it traded at .20 cents they were still borrowing money from the government and now they are paying the government back. They are paying the government back to the extent that the government will probably be fully paid back with a year from now. This reversal of fortunes for Fannie Mae leaves open the possibility that certain things can happen such as:

    1. The government might reconsider doing away with Fannie Mae because keeping Fannie Mae is good for:

    A. The government since they own $118 billion of the senior preferred and 4.6 billion shares of the common stock.

    B. The shareholders because they own $34 billion of the junior preferred and 1.14 billion of the common stock.

    C. The housing market because people will be able to sell and buy houses more easily with lower interest rates.

    D. Not put the government into a position where they are going to have to bail out the insurance companies insuring the loans if there is a housing downturn, like they did for AIG, while not reap the rewards for insuring the loans since the monies for insuring the loans will be going to the insurance companies.

    These possibilities are causing the stock to trade higher than the .20 it traded at when they were still losing money. The more money they make when they report quarterly earning the more likely these possibilities will come to fruition.

    If you take their last quarters income of $8.1 billion and multiple it by the current multiple of the S&P at 14.9 and subtract off the senior and junior preferred you get a common worth:

    ($8.1billion x 4quarters x 14.9multiple)-(118senior preferrd+34junior preferred)=$330billion market cap. Divide this by 5.7 billion shares outstanding (the government has 80% of these shares totaling 4.6 billion) you get a share price of $58 dollars per share.

    The longer it takes for a plan to be ironed out, pass the congress and senate with a majority vote and get signed by a president, the better it is for the government since they are keeping the profits in the meantime. The longer the time frame is and the more profitable they are in meantime, the weaker the case becomes for the alternatives.

    What do you think the probability of a plan going through if when it does?

    1. Interest rates will go up 2% on new home purchases.

    2. Interest rates will be at the mercy of the banks.

    3. 30 year fixed mortgages will be a thing of the past just like the arms of a jumbo loan.

    4. The government will still have to bail out the insurance companies if something goes wrong.

    5. The government will forfeit $118 billion in senior preferred stock.

    6. The government will forfeit its 80% stake in the common stock of a company worth $330 billion.

    7. The junior preferred stock holders who bought in when the CEO Mudd, who is currently in a law suit for inflating profits so he could get his bonus, will be wiped out.

    8. The common stockholders, who bought shares when Fannie Mae was selling loans predestined to fail:

    ‘"We want your CRA loans because they help us meet our housing goals," Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking conference in 2000’

    http://news.investors.com/ibd-editorials-perspective/122012-...

    will be wiped out.

    Fannie Mae went down because the banks were not doing their due diligence on making sure buyers were meeting the requirements.

    With the stricter enforcement of the requirements, Fannie Mae is back on its feet and proving to be a viable company.

    Fannie Mae came about originally to provide home buyers a more attractive interest rate than the free market could provide because the tax payers, who the loans are for in the first place, were taking the risk. In essence, we are all taking the risk to lower the rates for everyone. It’s like we are all paying taxes for a fire department to lower the risk of our house burning down.

    If the government doesn’t want the tax payers to have a lower rate by taking the risk, then all they have to do is charge a fee for the risk, since they are going to have to bail out the insurance companies anyway if something goes wrong.

    Go to: Restore fairness to Fannie Mae and Freddie Mac common shareholders

    https://petitions.whitehouse.gov/petition/restore-fairness-f...

    1. Conservatorship for whom? Fannie is delaying the raising of the debt ceiling.

    2. If they can take the Deferred Tax Assets then they don’t need to be in conservatorship.

    “Investopedia explains 'Deferred Tax Asset'

    It must be determined that there is more than a 50% probability that the company will have positive accounting income in the next fiscal period before the deferred tax asset can be applied.”

    3. Best net income since their inception in 1938.

    From Form 10-Q filing:

    "Our pre-tax income of $8.1 billion for the

    first quarter of 2013 was the largest quarterly pre-tax income in our history"

    4. Market cap of 70 Billion in 2004 with one forth less net income.

    5. 117 billion in senior preferred and 80% of the common.

    6. Initially 10% dividend now 100% of the profits not to go towards either the senior preferred or the common.

    7. Sold junior preferred under false profit pretense so the CEO could improve his bonus.

    From: http://www.renewamerica.com/co...

    "Former Fannie Mae head investigated for lying to investors -- his name is "Mudd" "

    8. Order of risk under new deal. Homeowners, private investors, banks then government.

    How is that different from what we have now?

    Homeowners lose their down payment.

    Private investors won’t invest without the government backing.

    Banks are settling with Fannie Mae on misrepresentation.

    So insurance will have to be for 100% of the loan instead of PMI for 20%.

    How much more will the insurance raise the rate? Compare a Jumbo rate to a conventional rate.

    From http://www.fanniemae.com/resources/file/mbs/pdf/basics-sf-mb...

    “Fannie Mae and its lender partners have helped to set mortgage market standards for over 50

    years -- since the inception of the modern residential mortgage industry. By continually reviewing and modifying its standards to reflect current economic and housing conditions, Fannie Mae has remained both a leader and a pioneer in the mortgage market, lowering the cost of homeownership in America.”

    We are in a housing crisis with our current historically low rates.

    9. Who can insure 5 trillion?

    AIG tried it with their Credit Default Swaps (CDS) and the government had to bail them out.

    10. So the tax payers should take the risk to keep interest rates low for themselves or Fannie Mae should charge for insurance.

    11. New plan is 5 years out. 8 billion for 20 quarters = 160 billion. 117 billion for the senior preferred and 34 billion for the junior preferred leaves 9 billion for the common.

    - It could take more than 5 years and therefore more net income is accruing.

    - The 8 billion quarterly net income could go up since house prices are going up.

    - The total payback is double what they borrowed not counting the common they have.

    12. What does wanting to end the GSE's have to do with keeping the profits from shareholders?

    13. Do you think they will ever implement a plan where rates will reflect the cost to insure the money from the private investors?

    14. If the money is insured, then why do we need the private investors?

    15. How long do you think the government will be able to keep the net income after they have been paid back?

    16. If they just considered it a wash on their senior preferred after they have been paid back, the common would be worth at a 15 multiple (the average since 1920) 8x4x15=480 billion which they own 80% of for a value of $384 billion. AIG trades at a 30 multiple.

    Earinings of 8 billion x 4 quarters x 15 multiple (average since 1920, S & P currently trades at a 14.9 multiple) = $480 billion. Government has $118 of Senior Perferred and there are $34 billion of junior perferred so $480 - $118 - $34 times 20% is $65 per share. And the government will make $118 billion that they were paid back plus another $118 billion in senior perferred plus 80% of $480 billion which is another $384 billion.

    1. The government will never be able to get rid of Fannie Mae and this is being proven because the current plan will never pass because it won't work.

    Private investors will not invest there money unless they have some guarantee.

    So they will have to insure and that will:

    1. Raise interest rate of mortgages and we are in a housing crises at the current rates.

    2. Still make the government responsible since there is no insurance company that can handle that much money.

    We saw this when the governmet had to bail out AIG from the last housing downturn.

  • Report this Comment On June 21, 2013, at 9:15 AM, Dadw5boys wrote:

    Banks and Private Equity want rid of Fannie and Freddie so they can control the home loan business, as I see it.

    Everyone should remember that Fannie was forced to accept all the bad paper the FDIC was holding from closing over 900 Banks. When the Banking Crash happened Fannie had less than .04 % in bad loans on their books !

    The CRA for over 30 years before 2000 had worked very well getting homeowners into run down areas to keep gangs and drugs out ! No homes until 2000 had sold for over $50,000 and no loans were made to people without a Job, Income and descent credit ratings. No Jobs and No Income meant no loan before 2000.

    Country Wide and others overvalued homes by an average of 32 % and all Investors who hold paper on those foreclosed homes should take a real good look. If you could find a link between bonuses paid to the In house Property Appraisers that Country Wide used you could prove Collusion and Fraud then real easy !

  • Report this Comment On June 21, 2013, at 9:39 AM, Caludio wrote:

    @Matt

    Who told you that financials dont lend themselves for DCF analisys? Look in this case I looked at the past not at the future because I used the CF of 2001 and the Intrinsic Value resulted $59 . Later on the average price of the share between 2001 and 2007 was $73. Had I not take such conservative aproach with the growth rate and then my estimate would have been exaclty what happened. Now the FCF is 31B (almost the same as the proyected profit) if I go out and say that the Intrinsic value is about $120 everybody will say that I am crazy, but with the oil and natural gas boom America will be a bright spot in the coming years..so I will not be surprised if Fannie reachs $120 by 2020.

    @goblin9773

    You are not wrong about Berkowitz and others like him.You are right.

    @notafool2013

    You are right: the risk-reward ratio is huge!

    @msimons4

    Thank you for your brilliant comment! Excellent job! I am going to print it because I want to read it again carefully .A lot of common sense. Smart!

    @everybody

    Lets don't forget that this conservatorship is NOT LEGAL and hence all its acts are not valid. Please read the complaint filed by law firms Hagens Berman Sobol & Shapiro and Spector Roseman Koddroff & Willis

  • Report this Comment On June 21, 2013, at 10:18 AM, TMFKopp wrote:

    @Gaubel

    re: Berkowitz / Fairholme, here's what it says on Fairholme's website:

    "The Fairholme Fund (NASDAQ: FAIRX) and The Fairholme Allocation Fund (NASDAQ: FAAFX), own approximately $2.4 billion redemption value of Fannie Mae and Freddie Mac Preferred Stock..."

    http://www.fairholmefunds.com/

    Hope that helps.

    Matt

  • Report this Comment On June 21, 2013, at 10:34 AM, TMFKopp wrote:

    @Claudio

    Re: using DCF with Fannie or any financial company...

    Peek below the CFFO line in the 2001 cash flow statement you're looking at. You've got trillions of dollars of portfolio activity -- that's all a normal part of operating activity for Fannie. For that reason, you can't just stop at CFFO and call that "free cash flow."

    Some businesses (think P&G or KO) lend themselves well to a DCF analysis. Banks, insurance companies, and, yes, Fannie Mae, not so much.

    Like I said above, you're better off using a multiple-based approach.

    Matt

  • Report this Comment On June 21, 2013, at 11:30 AM, Gaubel wrote:

    @Matt

    So are you saying Melvin Backman has dissembled in his reporting? Or are you saying that the only information that can used is what you selectively present? Is it the first, second, both or neither?

    Here is the article again to review:

    http://blogs.wsj.com/moneybeat/2013/06/03/bruce-berkowitz-pl...

    "Fairholme said it has a $2.4 billion investment in the two companies, whose common and preferred shares have surged this year amid a market-wide embrace of riskier assets. Fannie common shares rose 20% Monday to $2.53 and one preferred share series rose 18%.

    Hedge funds have been lobbying Congress to restore the dividend, which was suspended last year. Although Mr. Berkowitz has not done so yet, he plans to join those efforts, he said in an interview Monday with The Wall Street Journal. To him, restoring the dividend is just “the right thing to do.”

    Purchased largely this quarter, the Fairholme position is about 90% to 95% preferred stock with the remainder in common stock. He said the shares are split proportionally between the $8.2 billion Fairholme Fund and the $311 million Fairholme Allocation Fund."

  • Report this Comment On June 21, 2013, at 1:05 PM, Caludio wrote:

    @Matt

    Matt you are right. My intention was to use FCF not CFFO. However I took the data from Reuters

    paid platform and there is a mistake. They reproduced the row of CFFO in the row of FCF.

    I just verified in Barrons and the current FCF is

    14B . However ,by coincidence, I took 14Bas the initial FCF so my analisys is still valid. Of course I take a multi-based aproach for my final decision

    wich is very extensive to write it in a comment.

    But based in my conservative estimated growth of only 5% and the substancial distcount rate at 8%

    I think that $ 59 is a very modest target for Fannie.

    Other than Reuters mistake is there other reason not to use FCF in financials? I want to learn it.

    But again, the most important point here is that the conservatorship is not legal, it was imposed to the company by force and the government will have to negociate with the shareholders a way out of this mess. I think the government will never exercise the warrants and the company will be restored to the shareholders with about 1.2 B common shares instead of the diluted 5.7 . That will be the cheapest way out for Uncle Sam otherwise it will have to pay more than 40B to compensate shareholders.

  • Report this Comment On June 21, 2013, at 1:33 PM, TMFKopp wrote:

    @Claudio

    "Other than Reuters mistake is there other reason not to use FCF in financials? I want to learn it."

    Yes, as noted above, with financial businesses applying the concept of "free cash flow" in general isn't a great approach.

    For most businesses, the activity on the cash flow statement below CFFO (other than capex) is normally not part of day-to-day operations and normal business activity. It might, for example, be investing excess cash in short-term securities. In any case, it doesn't impact the "free cash flow" in the sense of it being distributable to shareholders.

    In a financial business, the cash flow statement activity below CFFO is still part of day-to-day activities and normal operations of the business, so trying to work out what is truly "free" cash flow is tricky and probably won't give you a terribly meaningful result.

    Matt

  • Report this Comment On June 21, 2013, at 2:27 PM, PaulApp wrote:

    We've known that without Fannie and Freddie the interest rate will be extremely high for anyone to own a home!

  • Report this Comment On June 21, 2013, at 2:29 PM, Stockbuster3000 wrote:

    @Matt

    You can't just read the first page of the 10-K report, you have to read the entire report. Did you read the part of what three things could if we no longer had Fannie Mae?

  • Report this Comment On June 21, 2013, at 5:36 PM, rezarock wrote:

    See what I don't understand is that FMNA and FMCC has gotten a bad wrap for the mishaps of 2008 but people aren't talking about the fact that the big banks are at fault for selling these bad mortgages which the government kind of forced FNMA and FMCC to buy. In fact isnt FHFA suing 18 banks for around 200 billion dollars.. *cough cough... the about the amount owed* I think there is a lot more that these analyst are missing which is kind of key. I'm not expert and I don't normally invest in stocks like this. But the fact of the matter is that If FNMA is now following the rules of the government and making a profit (all time high may I say) and if at the end the blame gets put on the banks then how can the government just come up and take them out?

  • Report this Comment On June 23, 2013, at 8:02 PM, goblin9773 wrote:

    @TMFKopp

    thank you for your response....in response, i agree that shareholder's rights are invalid...other than a 5% holder to nominate boardmembers....i am betting that boardmembers have some say in what is happening with the company.....with that provision, in the frank dodd act, the 5% shareholder that nominates a boardmember, might just have a little influence over how that boardmember of a private held corporation votes...

  • Report this Comment On June 25, 2013, at 12:41 PM, Baringo999 wrote:

    With the kind of money that Fannie and Freddie are making holding onto the shares is worth the risk. Buy yourself several thousand shares and hold tight. Once this cloud that is being created by the people who want to make money as the two company shares are tanking is over there is only one way the shares can go. UP!!! One day they will be back in the $80 range and then we can retire happily ever after.

  • Report this Comment On June 26, 2013, at 12:07 AM, philipmax wrote:

    Great discussion here. I only want to add one more thought.

    FNMA and FMCC were formed in 1934 to provide liquidity to banks making mortgage loans. They were government owned and they worked magnificently for 38 years, until 1972.

    Congress was nervous that the debt held (issued) by these entities was part of our NATIONAL DEBT.

    That is why they divorced FNMA and FMCC from government ownership and created Government Sponsored Entities (GSE) . Today, these GSEs carry nearly $19 Trillion on their books. Name me a congressman that would want to add this to our national debt.

    Secondly, IF this is a capitalistic form of gov't, than, just compensation has to be paid to current owners. After-all, when the government spun them out 41 years ago, it received a huge payday on the IPO,and, if they want to buy it back they have to cough-up big time, (calculations above are fair numbers to start with)

  • Report this Comment On June 26, 2013, at 5:38 AM, fabmarch53 wrote:

    Fannie & Freddie were broke past in 2008-2009. Federal Govt. helped both with taxpayer´s money. Some say this is socialism. I think not. Was common sense. USA would be in a civil war & famine just now, with a destroyed Financial System. But Freddie & Fannie performed so well lately that they can pay back all the bailout. The right thing to do is accepting all the debt paid back (adjusted for inflation). Those proposed ¨winding down¨ of Freddie & Fannie is not for protecting taxpayers, is for protecting politician´s wallets & bureaucracy. They (after paying ALL the debt) MUST BE returned to common & preferred shareholders (their natural OWNERS). Any other behaviour is CONFISCATION & USA-GOV COMMUNISM. Period.

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