In The News...

Shares of Fannie Mae and Freddie Mac are under pressure again this morning as both companies stock price have fallen almost 90% this year. Investors are increasingly convinced that the stocks will drop to zero if the government bails out the troubled companies. Washington-based Fannie Mae and McLean, Va.-based Freddie Mac, have lost a combined $3.1 billion between April and June, and investors fear the losses will continue to grow.

On July 13 the US government announced a plan that would give Fannie and Freddie unlimited government loans and would purchase stock in the two companies if needed for a period covering the next 18 months. Last weekend Barron's wrote that the government is pressing the companies to raise additional capital to guard against losses but it doesn't expect them to succeed. If they are bailed out it would essentially wipe out common shareholder value.

Brought to you, courtesy of The Mortgage Market Guide