The Federal Housing Finance Agency (FHFA) has again released an alert with respect to housing entities, Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Federal Home Loan Mortgage Corp (OTCBB:FMCC). The agency’s inspector general warned that the two government-backed entities might need more bailouts if the housing market continues to decline. The agency pointed out at the insufficient capital reserves to guard against future declines.
Capital dried up
The warning comes on the heels of similar alert raised by Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) CEO Tim Mayopoulos last month. He said that the company might potentially need more capital infusion from Treasury. The lack of capital emerges from Treasury’s decision to take hold of all the profits generated by Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddi Mac. Treasury’s actions left nothing in the hands of the two housing finance giants to support their own capital requirements.
Wrong arrangement
Both Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac were put into conservatorship so as to allow them to build a capital reserve. Even after seven years, there is no change in the status of the two companies, which now stand to be exploited by the Treasury. It is important to note that Treasury amended a clause in 2012, requiring both the housing companies to hand over 100% of their dividend to it.
Looking from all angles, the current arrangement in between the Treasury and the housing companies is not a desirable one. In fact, by not allowing Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) to build its capital reserve, the government is only trying to create more threats for the taxpayers, who might have to pay for future losses incurred by those two companies.
The stock of Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) settled 6.81% higher at $2.51 while recording an average volume of 7.10 million during the last session.
