Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) finished the last trading session unchanged after spending the day in a narrow range of $2.27-$2.32. The volume of the day remained commensurately dry at 1.9 million, considerably lower than the daily average of 4.8 million. This can easily be taken as an indication of a contraction in the volatility following the high level of activity in the last few days. The instrument has long been stuck in an intermediate range in the band of $2.00-$2.80 and only a firm resolution of this range can produce a trending move.
It appears things are not going to change anytime soon for Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie. There is no strong reason why the country with the most refined financial markets should have a government market for mortgages. Also, there appears no reason why the last nation to oppose socialized health care should hold on to socialized home ownership. Unfortunately, it is and it is going to stay. Recently, The White House acknowledged that housing finance reforms are next to impossible in the Obama administration.
During the 2008 financial crisis, the government placed the failing Federal National and Freddie Mac into conservatorship, and approved a $187 billion bailout. In 2012, the government modified the rules of the agreement to get additional profits, and has fetched $239 billion. That highlights the vulture investors who chose Freddie and Federal National stock in a deal crying foul.
As long the U.S. government claims all the profits, the investors hardly have any opportunity of making profits on their investments. They demand the mortgage companies to be recapitalized and be released from conservatorship recreating the system of public risk and private profit that existed before 2008 financial crisis. Michael Stegman stated that won’t and shouldn’t happen at least in Obama administration.
A mortgage industry operated by the government is equally complex. Problem is, changing the present mortgage finance system would create problems and no one is prepared to take that risk. As a result, the government is punting with problem unsettled.
There might be a course to fix existing problems. Republican Senator Bob Corker and Democrat Senator Mark Warner commenced working on a strategy in 2013 to phase out Freddie and Federal National, substitute them with private insurers, and offer government assurances in return for an open fee. However, like other measures, this plan foundered.