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Fannie and Freddie: Gone but not Forgotten
Home mortgage originators Fannie Mae and Freddie Mac have struggled dearly over the past few years. And, in an unsurprising and seemingly inevitable move, the equities, which could no longer meet listing requirements, were recently removed from trading on the New York Stock Exchange. That said, the companies will continue to file reports with the SEC and remain subject to federal securities laws. Meanwhile, both entities will soon begin trading on the over-the-counter market.
Fannie and Freddie continue to sustain huge losses, which stem from elevated housing foreclosures, high unemployment, and hefty mark-to-market losses in their derivative portfolios, among other factors. In fact, combined, the corporations lost a staggering $110 billion in 2008, alone. In order to stay afloat and avoid life-threatening liquidity problems, both have and will likely continue to receive huge cash infusions from the federal government. As for the stocks, back in 2004 and 2005, both traded for more than $70 a share, but fell to as low as $0.30 in 2008, and have remained depressed since then. Due to the sharp share-price declines, government intervention, as well as material concerns in regard to both companies being able to conduct day-to-day operations, The Value Line Investment Survey discontinued coverage of these equities about a year ago.
As a result of the depressed stock prices, the New York Stock Exchange has now delisted Fannie Mae and Freddie Mac shares. According to the rules of the exchange, if a stock’s daily closing price is below $1.00 for 30 consecutive trading days, it is removed. In the near future, interested investors will be able to find and track these equities on the over-the-counter market. However, at this time, tickers have not been assigned.