Fannie Mae (FNMA), Freddie Mac (FMCC) See Heavy Selling Pressure: A Good Opportunity?

For some time there had been hoping that the Supreme Court verdict was...

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For some time there had been hoping that the Supreme Court verdict was going to come as a major boost for the government-sponsored mortgaged companies Fannie Mae (OTCMKTS:FNMA) and Freddie Mac (OTCMKTS:FMCC).

However, things did not work out as expected and yesterday the Fannie Mae stock tanked by as much as 32% after the Supreme Court dismissed a case that had the potential of handing profits to the tune of many billions on to shareholders. After this development, the Freddie Mac stock declined as well.

In this regard, it is important for investors to take a closer look at Fannie Mae and the nature of its operations. The company is known for buying mortgage loans and then turning it into securities, which are then sold off to investors.

Fannie Mae buys these mortgages from some of the biggest commercial banks in the country. The financial crisis of 2008 naturally hit both these companies hard and they had to be bailed out by the United States government.

Eventually it came under government conservatorship. However, both companies have returned mountains of cash back to the treasury and have paid $300 billion in total.

The company’s shareholders believe that the two companies have paid $124 billion more than what was needed. The shareholders argued that the United States Treasury exceeded its authority as a conservatory, but the Supreme Court threw out the case. It had the potential of returning a massive pot of cash to Fannie Mae and Freddie Mac.

FNMAS stock ended lower by 32% to $2.52 on hefty volume. The stock has fallen about 70% so far this year. Over the past year, the stock has been moving within a range of $2.2700 – 7.1000.

FMCC stock ended lower by 36.77% to $1.41 on hefty volume. The stock has fallen about 70% so far this year. Over the past year, the stock has been moving within a range of $1.21-$3.08.

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