Shares of Fannie Mae (FNMA) plunged 12.3% and Freddie Mac (FMCC) plummeted 11.4% in afternoon trading Friday, after the Trump administration unveiled its plan for housing finance reform (), including recapitalization and ending the conservatorship of Fannie and Freddie. "Although Treasury does not believe a government guarantee is required, Treasury would support legislation that authorizes an explicit, paid-for guarantee backed by the full faith and credit of the Federal Government that is limited to the timely payment of principal and interest on qualifying mortgage-backed securities," the Treasury Department said. Moody's analyst Warren Kornfeld said he Treasury's proposals are "credit negative" for the government-sponsored enterprises' (GSE) unsecured creditors, as the reduction in the GSE's systemic importance wold reduce the likelihood of government support. Moody's rates Fannie's and Freddie's long-term senior unsecured debt at Aaa. Thursday's selloff in Fannie and Freddie shares come after both more than doubled year to date, with Fannie's stock up 145.8% and Freddie's up 134.0% this year. In comparison, the Dow Jones Industrial Average rose 14.8% year to date.
-Tomi Kilgore; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
September 06, 2019 14:20 ET (18:20 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.