Written by:
Gautam K Sawhney

Fannie & Freddie

Since the housing bubble, the two biggest losers which have grabbed continuous media attention have been the mortgage giants, Fannie Mae and Freddie Mac. In order to keep the companies afloat, the Treasury Department has injected $83.6 billion into Fannie Mae and $61.3 billion into Freddie Mac. The government bailout for the mortgage giants was to cover losses of mortgage-backed securities which, Fannie and Freddie owned or guaranteed. Since September 2008, Fannie and Freddie have been under government conservatorship.

The Federal Housing Finance Agency (FHFA) has been designated the conservator over the mortgage giants. The FHFA has required the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac to de-list their common and preferred stock from the New York Stock Exchange (NYSE). The NYSE requires a minimum average closing price of $1 for more than 30 days. Fannie Mae’s share prices have hovered near the $1 level while Freddie Mac’s share prices have traded at less than $2.

The mortgage giants, Fannie and Freddie do not meet the NYSE listing standards anymore. Therefore, their conservator, FHFA is requiring the GSEs to be de-listed from the NYSE. If Fannie and Freddie come up with a plan to restore the stock price then it will be allowed to continue trading on the NYSE. However, FHFA does not believe it will be able to raise the stock price of Fannie and Freddie in the near-term.

Freddie Mac said the de-listing will occur by July 8th. Fannie Mae plans to have the stock de-listed by early July. The shares will be traded publicly on the over-the-counter bulletin board. As the government controls majority of the shares within the mortgage giants, it believes de-listing will be the most effective process to determine the fate of the mortgage companies.

Thanks to Flickr for the photo.