Fannie Mae stock price target raised to $3 from $2 at B. Riley FBR

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Fannie Mae, Freddie Mac stocks sink after Trump administration’s plan unveiled; Moody’s says it’s credit negative

Shares of Fannie Mae plunged 12.3% and Freddie Mac plummeted 11.4% in afternoon trading Friday, after the Trump administration unveiled its plan for housing finance reform, including recapitalization and ending the conservatorship of Fannie and Freddie. “Although Treasury does not believe a government guarantee is required, Treasury would support legislation that authorizes an explicit, paid-for guarantee backed by the full faith and credit of the Federal Government that is limited to the timely payment of principal and interest on qualifying mortgage-backed securities,” the Treasury Department said. Moody’s analyst Warren Kornfeld said he Treasury’s proposals are “credit negative” for the government-sponsored enterprises’ (GSE) unsecured creditors, as the reduction in the GSE’s systemic importance wold reduce the likelihood of government support. Moody’s rates Fannie’s and Freddie’s long-term senior unsecured debt at Aaa. Thursday’s selloff in Fannie and Freddie shares come after both more than doubled year to date, with Fannie’s stock up 145.8% and Freddie’s up 134.0% this year. In comparison, the Dow Jones Industrial Average rose 14.8% year to date.

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