About a week ago FHFA announced the GSE's (Fannie and Freddie) will be allowed to retain their capital. This is a vital step if the twin GSEs are ever to be released from their conservatorship. Fannie and Freddie together account for something like 80% of the US mortgage market and every day MBS pools are bought/sold. The great thing about MBS is they have treasury like risk but higher yields.
Prior to the 2008 crash, Fannie was trading at something like $56/share.
Currently the government owns 80% of Fannie and Freddie and in November 2012 they retroactively amended the terms of the bail out agreement to redirect 100% of all profits to the government and 0% to the 20% public shareholders.
Obvious theft. What happened was in 2012 mortgage and housing started coming back STRONG and it was plain as day obvious to everyone Fannie and Freddie would soon be able to pay back their loans and exit conservatorship.
The Obama administration had other ideas though. To them, confiscating 100% of all profits was a way of securing $200+ billion a year in revenue without "raising taxes". It just meant confiscation instead. (What's the difference then?) So far, the republicans don't seem too eager to give up this revenue stream either. Makes one wonder how far they're willing to go... because I think we already know.
The irony is another amend to the agreement was none of these payments went towards actually paying down the loans.
By Feb 2014 Fannie and Freddie had paid back all of their tax payer loans and then some. For the past (nearly) 4 years now, all profits have continued to flow into the U.S. Treasury.
Fannie and Freddie borrowed $187 billion and and have paid back $271 billion yet still "owe" $187 billion. The government it would seem is the ultimately loan shark.
If you don't love your government, change it.
Prior to the 2008 crash, Fannie was trading at something like $56/share.
Currently the government owns 80% of Fannie and Freddie and in November 2012 they retroactively amended the terms of the bail out agreement to redirect 100% of all profits to the government and 0% to the 20% public shareholders.
Obvious theft. What happened was in 2012 mortgage and housing started coming back STRONG and it was plain as day obvious to everyone Fannie and Freddie would soon be able to pay back their loans and exit conservatorship.
The Obama administration had other ideas though. To them, confiscating 100% of all profits was a way of securing $200+ billion a year in revenue without "raising taxes". It just meant confiscation instead. (What's the difference then?) So far, the republicans don't seem too eager to give up this revenue stream either. Makes one wonder how far they're willing to go... because I think we already know.
The irony is another amend to the agreement was none of these payments went towards actually paying down the loans.
By Feb 2014 Fannie and Freddie had paid back all of their tax payer loans and then some. For the past (nearly) 4 years now, all profits have continued to flow into the U.S. Treasury.
Fannie and Freddie borrowed $187 billion and and have paid back $271 billion yet still "owe" $187 billion. The government it would seem is the ultimately loan shark.
If you don't love your government, change it.
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Triple bottom. FNMA needs to hold this level ($2.22ish) and should rebound.
Fannie / Freddie are a long term HODL and have the potential to trade at $50 if released from Conservator ship. That's why I bought 10k shares in my IRA but I may have to trim that back some and buy MGTI instead.