Fannie Mae & Freddie Mac: Why FNMA Stock & FMCC Stock Are A Buy Right Now!

- April 4, 2017

BNL Finance has published over a dozen articles related to Federal National Mortgage Association Fannie Mae (OTCMKTS:FNMA), Federal Home Loan Mortgage Corporation (Freddie Mac) (OTCMKTS:FMCC), GSE reform, and the greatest heist in history: $255 billion in profits from Fannie Mae and Freddie Mac paid to the Treasury as part of its $187 billion bailout during the financial crisis.

The bottom line is the Treasury takes all of Fannie Mae (OTCMKTS:FNMA) and Freddie Mac’s (OTCMKTS:FMCC) profits via government conservatorship. 100s of companies were bailed out during the recession, and all had an exit plan, including the banks and auto makers. Yet, Fannie and Freddie have returned more capital to the Treasury than any other company, and remain in conservatorship.

That’s where we are now, and with that background in mind, let’s explore why now is the perfect time to buy FNMA stock or FMCC stock.

First and foremost, FNMA stock and FMCC stock are nothing more than speculative bets that Fannie Mae and Freddie Mac will eventually get out of government conservatorship. Up until recently, the only hope seemed to be the courts. As a result, FNMA stock fluctuated between $1.50 and $2.50 for most of 2015 and 2016. Call it a $2.5 billion bet.

That price range, $1.5 to $2.5, is telling investors that the market saw no legitimate shot of GSE reform with the courts. If anything, the trading range suggests FNMA stock was nothing more than an instrument for swing traders. As a result, the Perry ruling in February did not shock me one bit. The Court of Appeals for the District of Columbia ruled that net worth sweeps were essentially legal as it pertains to Fannie Mae and Freddie Mac. For those unfamiliar, net worth sweep is what allows the Treasury to leave Fannie Mae and Freddie Mac undercapitalized and allows the Treasury to drain their earnings.

Nevertheless, FNMA and FMCC stock price in 2015 and the majority of 2016 properly illustrated to investors that there was no chance of ending government conservatorship in the courts. It was not going to happen, regardless if a blogger dissected every word of the court decision and finds a couple sentences they view favorably.

However, FNMA stock did not soar from $1.5 to $5/share in late 2016 because of Fannie Mae’s odds in the Perry ruling. No, those gains were driven by Steven Mnuchin being selected by Trump as Treasury Secretary. Mnuchin has publicly stated many times that GSE reform is a top priority. He co-owned the former IndyMac and knows all too well the importance of private market ownership.

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3 Comments

  1. zhaoxinming
    Posted April 4, 2017 at 5:57 pm | Permalink

    I want more information about fnma

    • Beth McLaurine
      Posted April 5, 2017 at 4:36 pm | Permalink

      Zhao,
      Go to seekingalpha.com and read Glen Bradford’s articles in addition to Brian’s.
      I have 2000 shares of FNMA I am keeping

    • realsavings
      Posted April 29, 2017 at 4:34 pm | Permalink

      Go to gselinks.com. It’s there you’ll find daily updates on the court cases, news articles and everything else you need to keep up with what’s going on with Fannie and Freddie.

2 Trackbacks

  1. […] Pages: 1 2 […]

  2. […] With Steve Mnuchin as Treasury Secretary, the game has changed for Fannie Mae (OTCMKTS:FNMA). It no longer relies on court hearings and appeals. Mnuchin wants to set the GSEs free. He has made it a top priority, and he is the one person who has the power to do so. Therefore, with FNMA stock trading where it was before Mnuchin was ever a factor, we believe there is no question that FNMA stock is now a buying opportunity (read here). […]

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