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Federal National Mortgage Association Message Board

  • it_is_brad it_is_brad Sep 28, 2008 12:17 PM Flag

    Honest Open tomorrow?


    $2.90 running up to $3.75

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    • Sell On The New:

      high: $ 2.95, low: $ 1.50 close: $ 1.53


    • This and FRE are the most volatile stocks on the exchange, at least for the last week, with no news. Imagine what it will be like with the Financial Bailout announced and the details yet to okayed by the Senate and House. Yes, volatile and huge swings. A trader's dream.
      I would add the following,which has hugely increased my comfort level in playing these two stocks:
      September 7, 2008
      Good Morning
      Fannie Mae and Freddie Mac share the critical mission of providing stability and
      liquidity to the housing market. Between them, the Enterprises have $5.4 trillion
      of guaranteed mortgage-backed securities (MBS) and debt outstanding, which is
      equal to the publicly held debt of the United States. Their market share of all new
      mortgages reached over 80 percent earlier this year, but it is now falling. During
      the turmoil last year, they played a very important role in providing liquidity to the
      conforming mortgage market. That has required a very careful and delicate
      balance of mission and safety and soundness. A key component of this balance has
      been their ability to raise and maintain capital. Given recent market conditions, the
      Page 2
      balance has been lost. Unfortunately, as house prices, earnings and capital have
      continued to deteriorate, their ability to fulfill their mission has deteriorated. In
      particular, the capacity of their capital to absorb further losses while supporting
      new business activity is in doubt.
      Today’s action addresses safety and soundness concerns. FHFA’s rating system is
      called GSE Enterprise Risk or G-Seer. It stands for Governance, Solvency,
      Earnings and Enterprise Risk which includes credit, market and operational risk.
      There are pervasive weaknesses across the board, which have been getting worse
      in this market.
      Over the last three years OFHEO, and now FHFA, have worked hard to encourage
      the Enterprises to rectify their accounting, systems, controls and risk management
      issues. They have made good progress in many areas, but market conditions have
      overwhelmed that progress.
      The result has been that they have been unable to provide needed stability to the
      market. They also find themselves unable to meet their affordable housing
      mission. Rather than letting these conditions fester and worsen and put our markets
      in jeopardy, FHFA, after painstaking review, has decided to take action now.
      Page 3
      Key events over the past six months have demonstrated the increasing challenge
      faced by the companies in striving to balance mission and safety and soundness,
      and the ultimate disruption of that balance that led to today’s announcements. In
      the first few months of this year, the secondary market showed significant
      deterioration, with buyers demanding much higher prices for mortgage backed
      In February, in recognition of the remediation progress in financial reporting, we
      removed the portfolio caps on each company, but they did not have the capital to
      use that flexibility.
      In March, we announced with the Enterprises an initiative to increase mortgage
      market liquidity and market confidence. We reduced the OFHEO-directed capital
      requirements in return for their commitments to raise significant capital and to
      maintain overall capital levels well in excess of requirements.
      In April, we released our Annual Report to Congress, identifying each company as
      a significant supervisory concern and noting, in particular, the deteriorating
      mortgage credit environment and the risks it posed to the companies.
      continued next post=====

      • 2 Replies to rusty_98070
      • read these posts to your benefit

      • Page 4
        In May OFHEO lifted its 2006 Consent Order with Fannie Mae after the company
        completed the terms of that order. Subsequently, Fannie Mae successfully raised
        $7.4 billion of new capital, but Freddie Mac never completed the capital raise
        promised in March.
        Since then credit conditions in the mortgage market continued to deteriorate, with
        home prices continuing to decline and mortgage delinquency rates reaching
        alarming levels. FHFA intensified its reviews of each company’s capital planning
        and capital position, their earnings forecasts and the effect of falling house prices
        and increasing delinquencies on the credit quality of their mortgage book.
        In getting to today, the supervision team has spent countless hours reviewing with
        each company various forecasts, stress tests, and projections, and has evaluated the
        performance of their internal models in these analyses. We have had many
        meetings with each company’s management teams, and have had frank exchanges
        regarding loss projections, asset valuations, and capital adequacy. More recently,
        we have gone the extra step of inviting the Federal Reserve and the OCC to have
        some of their senior mortgage credit experts join our team in these assessments.
        Page 5
        The conclusions we reach today, while our own, have had the added benefit of
        their insight and perspective.
        After this exhaustive review, I have determined that the companies cannot continue
        to operate safely and soundly and fulfill their critical public mission, without
        significant action to address our concerns, which are:
        • the safety and soundness
        issues I mentioned, including current
        • current market conditions;
        • the financial performance and condition of each company;
        • the inability of the companies to fund themselves according to normal
        practices and prices; and
        • the critical importance each company has in supporting the residential
        mortgage market in this country,
        Therefore, in order to restore the balance between safety and soundness and
        mission, FHFA has placed Fannie Mae and Freddie Mac into conservatorship.
        That is a statutory process designed to stabilize a troubled institution with the
        Page 6
        objective of returning the entities to normal business operations. FHFA will act as
        the conservator to operate the Enterprises until they are stabilized.
        The Boards of both companies consented yesterday to the conservatorship. I
        appreciate the cooperation we have received from the boards and the management
        of both Enterprises. These individuals did not create the inherent conflict and
        flawed business model embedded in the Enterprises’ structure.
        The goal of these actions is to help restore confidence in Fannie Mae and Freddie
        Mac, enhance their capacity to fulfill their mission, and mitigate the systemic risk
        that has contributed directly to the instability in the current market. The lack of
        confidence has resulted in continuing spread widening of their MBS, which means
        that virtually none of the large drop in interest rates over the past year has been
        passed on to the mortgage markets. On top of that, Freddie Mac and Fannie Mae,
        in order to try to build capital, have continued to raise prices and tighten credit
        FHFA has not undertaken this action lightly. We have consulted with the
        Chairman of the Board of Governors of the Federal Reserve System, Ben
        Bernanke, who was appointed a consultant to FHFA under the new legislation. We
        continued next post

    • Look at recent history - last week it trended up to 2.73 based on the speculation that the bill was going to be passed then reversed to the low 1's. So history maybe a descent gage as to what we see tomorrow.

    • opens at $ 2.25 imo

    • we will open over 2. and go up to 3's imo
      I will say open 2.17 high 3.69 :)

    • open @ $3.0

    • no one wants to throw a bids out there?

1.750.00(0.00%)10:40 AMEDT