Just like old times eh?
Ugly day for the common stock of Fannie MaeFNMA -30.76% and Freddie MacFMCC -26.81%.
Fannie shares dropped as much as 44% Tuesday and Freddie’s stock fell 39% at its low after the top Democrat and Republican on the Senate Banking Committee said they had reached agreement on the broad outlines of a bill to overhaul the nation’s $9.9 trillion mortgage market.
The bill will call for replacing Fannie and Freddie with a new system of federally insured mortgage securities in which private insurers would be required to take initial losses before any government guarantee would be triggered.
Of course, considering these issues relate to Washington and the housing market, the bill most likely has a long road ahead before getting passed. But that hasn’t stopped investors from fleeing the stocks Tuesday.
Both stock declines–which occurred on more than seven times their average daily volume, according to FactSet–represent a major reversal from the sharp gains registered over the past 12 months. Fannie shares, which traded as low as 29 cents a year ago, peaked at $6.35 on Tuesday before falling sharply....MORE