The Return of Mortgages? Fannie Mae Finally Breaks the Slump and Rises 5% (FNMA)

Fannie Mae (OTC: FNMA) saw a 5% gain today, reaching a high for the month of $0.30. Compared to where the value of the stock has been for the last few months, this is a very significant gain. Not only is it the highest the stock has been in the month of August, but it is the highest the stock has been since May 10, 2012. In fact, the company has not seen such strong numbers since earlier this year.

What makes Fannie Mae one of the more unique penny stock enterprises on the market is that it is a government-sponsored enterprise that was charted by the United States Congress to support the liquidity and stability of the secondary mortgage market. To put it another way, Fannie Mae was created as the ground support for people looking to buy and sell mortgage-related assets. In general, Fannie Mae works in three distinct mortgage business areas: Single family business, multifamily business and capital markets group.

For the last five years, Fannie Mae has taken a lot of heat. This is not really much of a surprise, considering the latest recession has ultimately been caused by the incredible amount of poor secondary mortgage loans being lent to home owners – something that Fannie Mae has played an integral role in. www.smallcapnetwork.com had it right when it reported that it has taken the company five years to either thrive or fail.

So does this recent gain of 5%, the highest the company has seen its value be in months, mean that the company is finally thriving? Consider the following quarterly reports that were recently released by Fannie Mae:

  • In the first quarter, the company saw a net income of close to $2.7 billion.
  • In the second quarter, the company saw a net income of close to $5.1 billion.

Compare the two numbers and you can see that this is a huge turnaround for a company that had experienced close to $3 billion in loses when the credit bubble popped. It should be noted that the company has needed close to $100 billion in loans from the Federal Reserve to help pay back taxpayers. However, this recent report states that the company will no longer need government assistance, indicating that the company is not only thriving now, but will be doing so for some time to come.

A recent press release concerning Fannie Mae and the housing market was released from Washington on August 7, 2012. The announcement stated that, although Americans’ confidence in the economy and their personal finances is still low, there has been a much more positive outlook on the housing market. Senior Vice President of the company, Doug Duncan, stated in the announcement that he believed there was a positive momentum growing in the public towards the housing market. It is perhaps this perception of the market that has helped Fannie Mae finally break out of its slump.

In the end, the success of Fannie Mae, as always, remains in the hands of the public. Sure, right now the stock is at one of its all-time lows (and is very enticing for penny stock investors). However, the world economy is not out of the woods yet. If another crash occurs, whether it is another housing bubble or a carbon bubble, it will be companies like Fannie Mae that will be hit the hardest. On the other hand, if the economy does finally make the turn and become more stable, it will be companies like Fannie Mae that see success.

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Published by Van Bettauer

Van Bettauer is a financial aficionado from Vancouver, British Columbia. He currently studies at UBC, pursuing a Bachelors of Science degree. Van has been freelance writing for many years, specializing in copywriting, report writing and article writing. The combination of his scientific studies and writing experience brings a new and fresh perspective to the financial world. Visit Bettauer's Google+ page at the following address: https://plus.google.com/100770875710593766367/posts

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