Not so easy to replace Fannie and Freddie

While Washington is finally seriously thinking about how to replace Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB), as on many other issues, Republicans and Democrats are deeply divided about what to do.

Superficially, the argument is about the role of government in the mortgage market, writes the WSJ's Nick Timiraos, but the real question is whether Americans should have "relatively easy access to the pre-payable, 30-year, fixed-rate mortgage?"

One problem with scrapping Fannie and Freddie is that they - with a government guarantee - back $4.5T of almost $10T in outstanding mortgage debt. Any replacements would have to absorb trillions of dollars of credit and interest-rate risk.

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Comments (7)
  • philipmax
    , contributor
    Comments (421) | Send Message
    There are always idiots out there who think that they can fix the system by scrapping it. Fanny and Freddie fill a particular need in our financial system that is crucial in providing the linchpin guarantees that make the whole mortgage industry viable. Take them away and the system collapses. Fanny has been around for 80 years doing its job.
    The lapses in management of the 2000-2008, was criminal. Those managers escaped Scott free with billions in bonuses for approving unmanageably poor quality mortgages to be insured. Correct that flaw and the system survives.
    23 Sep 2013, 09:30 AM Reply Like
  • 472441
    , contributor
    Comments (56) | Send Message
    Thoughts on FNMA and FMCC bailing-out based on my observation....
    This is huge and there are lot of factors for the US treasury to consider before it takes FNF out of C-ship.
    My thoughts:
    1. It will happen on Friday after the close (most likely around Thanksgiving - 2013).
    2. On the next trading day FNMA will open at anywhere between $7 to $12 .
    3. Volume will be in the range of 500M to 700M shares.
    4. There will be lot of volatility in the PPS.
    5. FNMA could settle somewhere in the range of $9-$10 for a while.
    6. 2-3 weeks later FNMA and FMCC will start trading in NYSE.
    7. Following 2Q will provide some light to the investors.
    8. Around one year after coming out C-ship FNMA could start trading between $15-$20.
    9. Later in the next 2-3 years I see FNMA trading ~$30-$40.
    10. US housing industry will start rocking for the next 10+ years or until some greedy HedgeFunds starts to mess it up.


    Until all the above things occur MMs will start collecting shares from small investors, either through stop loss, panic sale or by misleading articles by big funds.
    Please mark this post! I have been observing this stock for last 5+ years...


    Note: Please do your own DD before investing into this stock.
    23 Sep 2013, 10:10 AM Reply Like
  • user92718
    , contributor
    Comments (166) | Send Message
    I didn't catch what you mean?
    If FNMA and FMCC wil be going to be replaced, then why their shares will be selling in the range of $7 and $12?
    23 Sep 2013, 11:26 AM Reply Like
  • eFLOP
    , contributor
    Comments (50) | Send Message
    LOL....that guy is a goofball. He's just trolling
    24 Sep 2013, 12:11 AM Reply Like
  • 472441
    , contributor
    Comments (56) | Send Message
    Who told you FNMA and FMCC are going to be replaced? What will replace FNMA and FMCC giants?
    Please do your homework before you post.
    24 Sep 2013, 09:58 AM Reply Like
  • 472441
    , contributor
    Comments (56) | Send Message
    Yes screwball you are just browsing this article, LOL.
    24 Sep 2013, 10:00 AM Reply Like
  • Ahmed Amin
    , contributor
    Comments (18) | Send Message
    Fannie and Freddie will remain no matter what. Just like AIG was given a second change, Fannie and Freddie are much more important than AIG.
    We have more regulations in place already where what happened in 2008 and 2009 cannot happen again.


    No one can replace fannie and Freddie. If there was one that could then it would have stepped up years ago.
    Fannie and Freddie are here to remain.


    I am heavily in $FNMA.OB
    23 Sep 2013, 11:01 AM Reply Like
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