Fannie Mae, Freddie Mac Stock A 'Considerable Risk,' Say Analysts Who Downgrade Both To Underperform

Shares of Fannie Mae FNMA and Freddie Mac FMCC fell Monday after Keefe, Bruyette & Woods analysts downgraded the stocks to Underperform. Here's a look at the latest developments for the mortgage giants. 

What To Know: The Keefe, Bruyette & Woods analysts, led by Tommy McJoynt, said that though the odds of a privatization attempt have grown lately, they see "considerable risk" to the stocks at their current levels. Shares of Fannie Mae and Freddie Mac are up 333% and 343%, respectively, since the day before the election of President Donald Trump. 

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The analysts increased the probability of the senior preferred shares being forgiven to 10% from 5%, but said they see a failed attempt at privatization or a successful privatization with dilution of senior preferred shares to common as more likely outcomes. 

However, the firm did raise the price target for Fannie Mae from $3 to $4 and raised Freddie Mac from $4 to $4.50 based on the higher probability of forgiveness of the senior preferred shares. 

What Else: Trump recently announced plans to nominate private equity CEO Bill Pulte as director of the Federal Housing Finance Agency (FHFA), which is expected to oversee efforts to return Fannie Mae and Freddie Mac to the private sector, according to Reuters.

FNMA, FMCC Price Action:  According to Benzinga Pro, Fannie Mae shares closed Monday down 4.88% at $5.46 and Freddie Mac shares closed down 3.25% at $5.06.

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