Why Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) Is Declining?

Right-wing purists will probably welcome recent calls by Senator Johnny Isakson to liquidate Freddie Mac and Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA). However, it was short-lived when they discovered that Sen. new bill would transfer the burden of all of the current liabilities of Freddie and Fannie, nearly $5 trillion, to the U.S. taxpayer. The measure will increase the national debt.

The details

In February, without any announcement, Isakson introduced the Mortgage Finance Ac, which would place Freddie Mac and Federal National Mortgage into receivership under the leadership of a new government-controlled Agency. The new legislation foresees a new securitization plan and payback for the U.S. taxpayers over ten years for their rescue of the GSEs in 2008. It is immaterial that Freddie and Fannie have already returned more than $40 billion, the amount that they were loaned.

The position

The fact that Federal National Mortgage and Freddie Mac currently guarantee almost half of all U.S. mortgages, valued around $5 trillion, is not insignificant. The government should analysis as a receiver and should record the massive portfolio. It will get to know the sum is equivalent to almost one-third of U.S GDP.

The concerns

The new bill of Isakson will load the government with $5 trillion in debt. The bill would also result in additional problems like future access to mortgages for middle-class Americans. It obliterates Freddie and Federal National Home without a credible alternative. The two companies have converted the dream of home-ownership a practical reality for millions of U.S. residents. Isakson intends to wipe out all the efforts of the two companies and replace them with a new, untested and risky securitization platform. Certainly, it doesn’t appear to be the justified way to follow and therefore it is not getting support from the two companies and also from the consumers. The burden of the new bill will fall upon the sector, companies and the most importantly the clients.

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