Don't Chase Federal National Mortgage Association (OTCMKTS:FNMA) and Federal Home Loan Mortgage (OTCMKTS:FMCC) Stock

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Federal National Mortgage Association (OTCMKTS: FNMA) and Federal Home Loan Mortgage Corp (OTCMKTS: FMCC) are two Government Sponsored Enterprise (GSE) that have a history stretching back to The New Deal. During their time they have seen their ups and downs, mostly ups, until the financial crisis hit. In 2008, the stocks crashed going from 48 USD to less than a dollar.

Since then Federal National Mortgage Association (OTCMKTS: FNMA) and Federal Home Loan Mortgage Corp (OTCMKTS: FMCC), more commonly referred to as Fannie Mae and Freddie Mac, have made a small recovery and have traded between a dollar or 2 for the last ten years. Recently the stocks got a 33% bump on the hope that the government would finally let go of Fannie Mae and Freddie Mac. This isn't the first time this has happened, and in the many lawsuits the companies and their stock have been at the center of the result is always the same. FNMA and FMCC are destined to remain what is, in essence, a government treasury, at investors expense.

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What Happened with Fannie and Freddie?

In what many have described as a scandalous chain of events after the market crash everyone "too big to fail" was bailed out of the market, this includes Federal National Mortgage Association (OTCMKTS: FNMA) and Federal Home Loan Mortgage Corp (OTCMKTS: FMCC). They received a bailout loan, paid the money back and then kept paying the money back, and it hasn't ever really ended. The few quarters the company has turned a profit it was quickly erased by the federal hand reaching into their pocket. The stock has followed suit, making moderate gains that are always quickly erased.

In short, anyone holding this stock from some point in the past 2 decades has seen either massive losses, a small gain, or are breaking even at this level, only the most aggressive traders are making any profits here. The recent 33% markup is likely to fade again quickly after  FNMA and FMCC lost their most recent appeal. Going forward investors hope the government is setting up a plan for  Federal National Mortgage Association (OTCMKTS: FNMA) and Federal Home Loan Mortgage Corp (OTCMKTS: FMCC) to recapitalize and release from GSE status, unfortunately this is basically the same investment thesis that has been going since the 2008 decline and the courts don't seem to have any interest in letting Federal National Mortgage Association (OTCMKTS: FNMA) and Federal Home Loan Mortgage Corp (OTCMKTS: FMCC) off of the hook any time soon.

For a short time during the 2016 campaign President Trump and some of his administration spoke on the Federal National Mortgage Association (OTCMKTS: FNMA) and Federal Home Loan Mortgage Corp (OTCMKTS: FMCC) situation, but two years later, they seem to have forgotten about them completely in the wake of numerous scandals, arrests, and general failed policy. Some analysts seem to believe Treasury secretary, Steve Mnuchin, has some elaborate plan to install allies, for the cause of release, on to the FNMA and FMCC boards, which seems goofy and far-fetched at best. Sure, it's possible Trump and Mnuchin have some plan to save all the bagholders the companies have accumulated over the years, but even if they do it will probably go as well as it has for all their other plans that have failed spectacularly. It's an extremely bad bet to hang your investment hopes on an administration whose primary accomplishments include doubling black lung deaths and reintroducing asbestos. 

Comments (8)

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  • Tito
  • ,  Contributor
  • 24 August 2018, 03:08 pm

Nothing but junk

   0   Reply (0)   Follow(437)  

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    I don\'t understand how the Gov. can take control of them indefinitely

       0   Reply (0)   Follow(437)  

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      I wouldn\\\'t touch this stock with a ten-foot pole\n

         0   Reply (0)   Follow(437)  

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        No Guts No Glory boys! Buy and Hold! Think long term! Not this short 5-10 years.... you should be thinking like me 30 and 40 commitments

           0   Reply (0)   Follow(437)  

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          • John R
          • ,  Contributor
          • 24 August 2018, 12:08 pm

          Look, if this case had not been filed we would be well north of 2 dollars today and going up. Court cases mean nothing this will have to be decided by the administration if it is to be settled in my life time.

             0   Reply (1)   Follow(437)  

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            • Jesse
            • ,User
            • 24 August 2018, 01:08 pm

            The same manipulation has happened countless times for nearly a decade and only the shorts have benefited. This time it didn't even take a Carney WSJ article to bring it down

               0  

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              • DoubleD
              • ,  Contributor
              • 24 August 2018, 12:08 pm

              Still has a 2000% upside from here, despite the run-up. I\'ve been adding shares continuously. All I can tell you guys is: Anywhere below $2.50 is a gift.

                 0   Reply (1)   Follow(437)  

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                • Scott
                • ,User
                • 24 August 2018, 01:08 pm

                every court case that is lost, feels like a dagger. I keep waiting for just one to be in our favor. I know there are many more to go, but if they all fall short, the less likely, the scotus will ever hear it

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