Fannie And Freddie Shareholders Shouldn't Expect Resolution In 2017

If there’s one thing Federal National Mortgage Assctn Fnni Me FNMA and Federal Home Loan Mortgage Corp FMCC investors are used to these days, it’s waiting. A According to Congressional staffers, Fannie Mae and Freddie Mac investors will likely be waiting until at least 2018.

Fannie and Freddie shares skyrocketed in late 2016 after Treasury Secretary Steven Mnuchin said the new administration plans to get the two entities out from under government control. However, Congressional staffers now say the Senate Banking Committee doesn’t have Fannie and Freddie at the top of the priority list at this point. Instead, the committee is focusing on renewing its flood insurance program and eliminating Dodd-Frank regulations on the financial sector.

Related Link: Steven Mnuchin May Now Be Fannie Mae And Freddie Mac Investors' Last Hope

In the meantime, investors will be watching closely for any changes in the way the government handles Fannie and Freddie’s quarterly dividend payments. Since 2012, 100 percent of the two entities’ profits have been turned over to the Treasury. If the Trump administration plans on eventually returning control of Fannie and Freddie to shareholders, the first step in the process would be to recapitalize the mortgage giants.

Height Securities analyst Edwin Groshans expects that it would take more than a decade to recapitalize Fannie and Freddie to a point where they could safely be released from government conservatorship.

Groshans said Mnuchin has pledged to first explore a bipartisan plan for Fannie and Freddie.

“That process will have to play out until it in essence fails,” Mnuchin said. “When that process fails, that would open the opportunity for Mnuchin and Watts to act.”

In the meantime, Fannie and Freddie shareholders must continue doing what they have been doing for years now: watching, waiting and hoping.