Fannie Mae, Freddie Mac to delist shares from NYSE
By J.W. ELPHINSTONE
The Associated Press
Wednesday, June 16, 2010; 1:00 PM
NEW YORK -- Government-sponsored mortgage purchasers Fannie Mae and Freddie Mac plan to delist their shares from the New York Stock Exchange after their stocks had trouble meeting listing requirements.
Shares of both companies tumbled.
Fannie Mae shares dropped 42 cents, or 46 percent to 50 cents, while Freddie Mac slid 58 cents, or 48 percent, to 64 cents in afternoon trading.
The companies' regulator, the Federal Housing Finance Agency, said Wednesday that Fannie's shares have been below the $1 average price level for 30 trading days. NYSE rules require a company to take action to boost its shares or delist. Freddie's shares have hovered close to the $1 mark.
The move to delist "simply makes sense and fits with the goal of a conservatorship to preserve and conserve assets," said FHFA Acting Director Edward J. DeMarco in a statement.
The agency expects Fannie Mae and Freddie Mac shares to trade, starting next month, on the Over-the-Counter Bulletin Board, an electronic quotation service.
"It's logical," said Keefe, Bruyette & Woods Inc. analyst Bose George. "The pretense that they were public companies didn't make sense. They were kept around so the government could pursue its housing goals."
The government took over the pair in September 2008 after they suffered heavy loan losses following the housing crash. So far, it's cost $145 billion so far and is likely to be the most expensive of all the financial bailouts.
Late last year, the Obama administration pledged to cover unlimited losses through 2012 for the companies, lifting an earlier cap of $400 billion. And with the housing market still on shaky ground, Obama administration officials say it is still too early to draft any proposals to reform them, or the broader housing finance system.
The pair along with the Federal Housing Administration and the Veterans Administration backed nearly 97 percent of home mortgages in the first quarter of this year, according to trade publication Inside Mortgage Finance.
"This is long overdue. The NYSE has been exceptionally kind to Fannie and Freddie to allow their stock to continue trading for as long as it has," said banking analyst Bert Ely.
In 2007, shares of both companies traded above $60. As the housing crisis deepened the stocks lost almost all of their value, plummeting below $1 by September 2008. Since then, the shares have bounced above and below the $1 mark as traders speculated that government may one day be able to sell its stakes in the companies.
Fannie, based in Washington, and Freddie, based in McClean, Va., expect OTC trading to start July 8, or 10 days after they each file a Form 25 with the Securities and Exchange Commission. Both companies said they expect to file that form on June 28.
Fannie and Freddie were created by Congress to buy mortgages from lenders and package them into bonds that are resold to investors. Together they own or guarantee almost 31 million home loans worth about $5.5 trillion. That's about half of all mortgages.
During the housing boom, the two loosened their lending standards for borrowers and are now reeling from the housing bust.