The Mortgage Giants Fannie Mae and Freddie Mac stocks are being absolutely pummeled today. In mid day trading both of the companies stocks are down more then 20%!! From what I can tell this is due to two things. 1. The continued spike in foreclosures of which Fannie and Freddie both have massive exposure to and 2. The both companies are running in the RED for 2 consecutive quarters which is severely cutting into the companies liquidity. The companies main function is to be liquid and to keep the mortgage markets liquid. Fannie and Freddie were purchasing bundles of the Sub-Prime loans originated by and for any one with a pulse during the last 5 years. Because of this their individual portfolios both contain Billions of dollars of these loans which are currently experiencing foreclosure percentages as high as 25 - 30%. Investors are fearing that the 2 Giants are going to run out of money to purchase new loans with. This would have a rapid trickle down effect to all the major lenders that sell their mortgages to these companies (which is everyone). Simply put in Fannie and Freddie run out of money to purchase mortgages, then every bank in America runs out of money to lend for new mortgages. The government can't let that happen or our entire economy is going to be at risk of not only a recession but maybe even a D________n. Snnnf Snnf do you smell that? I smell another big huge government bailout, one that could make the Bear Sterns bail out look small in comparison. Let's hope these 2 big player's can get their ships righted before that has to happen.
Stay Tuned....
Stetson Lowe_The Mortgage Insider
