A new Senate proposal has extinguished the hopes of Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Federal Home Loan Mortgage Corp (OTCBB:FMCC) investors as a new Congress is preparing to revamp the mortgage market infrastructure of the country. The wording of the said proposal is likely to hit the investors of the two federally controlled housing companies, who are long waiting to get their share of payouts from the profits of these companies.
Negative for investors
According to Compass Point Research & Trading analyst, the proposed bill will close the way for any administrative action and will largely give the powers in the hands of Congress, which in turn could postpone the relief to the investors until 2017. The bill aims to revamp the bank-reform laws that were established in the midst of the financial crisis. The draft of the bill tabled by Alabama Republican Sen. Richard Shelby aims to push Congress to show results on GSE reform, which saw little development since both Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie were put under federal conservatorship.
The bill termed as “Financial Regulatory Improvement Act of 2015” has stated several measures to be undertaken by Congress so as to progress on the reforms front for both Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie. Some of the proposals include barring the government from using the increases in fees by the GSEs for anything other than the GSE reform. This measure will restrict Congress from using the two housing companies as cash cow, which is positive from the perspective of investors. However, the second measure that outlines prohibition of Treasury from selling its stake in GSEs without prior permission from Congress can turn to be negative for the investors.
However, the possibility of the proposed bill to come into enactment is still bleak based on the opposition from the Senate Democrats, who want the bill to be more focussed on smaller banks. The stock of Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) fell 1.59% to $2.79 as 4.60 million shares traded hands.