A Good Look at Fannie Could Raise Some Eyebrows (FNMA)

More than 90% of home loan financing in the United States runs through the taxpayer-subsidized books of the Federal National Mortgage Association (OTC: FNMA) known as Fannie Mae, and her sibling Government Sponsored Entities called Freddie Mac (OTC: FMCC) and the FHA. Since the financial crisis began, Fannie Mae and Freddie Mac have suffered a combined loss of $170 billion. Despite the continual guarantee of mortgages by the two, the housing market continues suffer the doldrums. The ineffectiveness of Fannie Mae and Freddie Mac have some wondering if it is not time to cut bait and get the government out of the mortgage business. President Obama favors staying the course while his opponent believes the time may have come to pack up the tackle box. The fate of Fannie Mae and her brother Freddie Mac may be determined by the results of the November election.

Is it the elections in three months, the melancholy in the housing market or the mounting losses that have buyers’ enthusiasm for Fannie Mae shares stuck in neutral? Like an old car rolling downhill with the driver popping the clutch, Fannie Mae stock occasionally sputters to life. Shares closed the last day of the trading week with a gain of 4.6% on volume that closely matched the 1.3 million shares traded on an average day. The stock opened the session this morning on the low for the day at $0.23. Buyers and sellers struggled for the upper hand throughout most of the day. With two hours to go in the trading week, almost a third of the 1.6 million shares traded poured in. This sent the stock up over a penny to an intraday high of $0.244. When the closing bell rang, the final print on the afternoon was stamped at a hair above $0.24

The last 52 weeks have seen shares of Fannie Mae trade in a range from $0.19 to $0.40. In mid-February, or about two months after making a new annual low, Fannie Mae shares took off for the summit. The stock has gradually declined since making a new high, feinting a few rallies on the way. Volume has also decreased markedly since the days when it traded 20 million shares in February.

In other news concerning Fannie Mae, a spat was brewing between the Federal Housing Finance Agency and Treasury Secretary Tim Geithner. Administration plans that would allow Fannie and Freddie to write down the principle for homeowners underwater on their mortgages hit a snag when the head of the FHFA said he would not allow the two mortgage giants to execute the plan.

Stock promotions for Fannie Mae found on Stockpromoters.com have been silent since October of 2011. On Twitter yesterday, @dan_freed looked at the possible implications for Fannie Mae if Romney wins the election. On Monday, @Seeking Alpha highlighted Fannie Mae in its must-know news.

Traders in Fannie Mae are probably not thinking about next week. It is November and beyond that most likely has them wondering.

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).

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