Zacks_Analysts' Blog : Freddie, Fannie to Delist - Analyst Blog

The regulator of the mortgage finance giants Freddie Mac (FRE) and Fannie Mae (FNM) said on Wednesday that having failed to maintain listing standards with lower-than-minimum price requirements, these home funding companies will no longer be allowed to trade their shares on the New York Stock Exchange (NYSE). However, according to the companies, the shares would trade in the over-the-counter market.



Amid increasing concerns that the mortgage finance institutions did not have enough capital to withstand losses on their portfolio, the government announced the takeover of Freddie and Fannie in 2008 to prevent a collapse.



Since September 2008, the companies are under government control with almost 80% being owned by US taxpayers. Both the companies were placed under the conservatorship of The Federal Housing Finance Agency (FHFA).



Following the U.S housing crisis, Fannie and Freddie were the primary institutions that bought mortgages. The government backing helped them raise money at lower rates to support this action. As a result, the financial crisis was significantly leveraged on these mortgage finance

giants.



Until now, these two companies have received more than $145 billion federal aid in total. Also, there are open credit lines for these companies with the Treasury Department through 2012.



The biggest losers were the shareholders of these companies. As part of the bailout, the U.S. Treasury received warrants to buy 79.9% of the companies' common stock, effectively wiping out shareholder value.



For most of the months since the conservatorships started, the shares of each of the companies have floated around the required minimum average closing price of $1 for more than 30 trading days. Finally, Freddie and Fannie failed to maintain the minimum price required to remain listed.



However, according to FHFA, the delisting is not the reflection on either institute’s current performance.



Freddie and Fannie will continue to file reports with the Securities and Exchange Commission (SEC). Also, they remain subject to federal securities laws.



We anticipate losses of Freddie and Fannie to increase in the coming quarters and the conservatorship to continue for a long time, and thus see no value for the common shareholders. However, we do foresee these institutions’ increased participation in the MHA Program, potentially reducing losses from foreclosures in the upcoming quarters.
Read the full analyst report on "FRE"
Read the full analyst report on "FNM"
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