Shares of Fannie Mae and Freddie Mac dropped sharply this Friday as investors started to lose hope for a quick change in how the companies are run. Both stocks fell by about twelve percent, marking a rough week for the mortgage giants. Even though the shares are still higher than they were a year ago, they have lost nearly half of their value since reaching a peak in September. People who own the stocks are becoming very nervous about when, or if, the government will finally let these companies operate on their own again.
Much of the worry comes from new housing policies being pushed by President Trump. He recently ordered Fannie and Freddie to buy two hundred billion dollars worth of mortgage bonds to help lower interest rates for homebuyers. While this move might help people buying houses, investors fear it means the government plans to keep tight control over the companies for a long time. There is also a lot of talk that the President might announce even more changes to housing rules during a big economic meeting in Switzerland next week.
In the middle of last year, there was a lot of excitement that Fannie and Freddie might soon have a massive initial public offering. Some experts thought the companies could be worth five hundred billion dollars and were hopeful that a stock sale would happen quickly. However, recent signals from the government suggest that a public sale is not going to happen anytime soon. This has dampened the enthusiasm of many investors who were betting on a fast payout.
Fannie and Freddie have been under government control since the financial crisis in 2008. While there have been many plans to set them free over the years, nothing has moved forward yet. For now, the focus of the current administration seems to be on making homes more affordable rather than selling off the government’s stake in these companies. As long as the future remains this uncertain, investors are likely to remain cautious about holding onto the stocks.
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