Fannie Mae-No Politics (FNMA)

[Ripping7]

http://seekingalpha.com/article/1482961-no-good-news-for-fannie-mae-and-freddie-mac


On May 31, 2013, the U.S. Treasury and HUD released a paper that provided three options that would likely reduce or eliminate both Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB). I reiterate my position to steer clear of both of these Government Sponsored Enterprises (GSEs). The Fed's latest action was to sweep all of the profits from first-quarter 2013 from both Fannie and Freddie into the U.S. Treasury without recourse for the common stock holders.

Reuters News Service reported on June 4. 2013, that draft legislation from a bipartisan group of U.S. senators would plan to liquidate Fannie Mae and Freddie Mac within five years and be replaced by another entity offering government reinsurance for mortgage-backed debt. Although this is a long way from becoming law, there is substantial support for eliminating the Government Sponsored Enterprises (GSEs) as we know them today.

The draft bill, first reported by Bloomberg on May 31, said revenues from a liquidation of the two companies would first be used to repay the government for its stake in the companies, with any remaining funds going to junior preferred shareholders and finally common shareholders.

Most analysts said it was unlikely any funds would remain beyond what would be needed to repay the government.

Fannie Mae and Freddie Mac secured almost $190 billion in taxpayer aid and have paid the Treasury about $132 billion in dividends. The terms of the bailout do not allow them to buy back the government's stake, which means they will keep making dividend payments as long as they are profitable without ever recovering the loan amount.