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Fannie and Freddie Keep Flying High: Financial Winners (Update 1)

Stocks in this article: FNMA FMCC FAIRX FAAFX I:BKX

Updated from 12:48 ET with market close information and updated stock returns.

NEW YORK ( TheStreet) -- Investors on Monday kept pouring money into common stocks of Fannie Mae (FNMA) and Freddie Mac (FMCC).

Shares of Fannie Mae rose 21% to close at $2.53, following a 21% increase on Friday. Friday's rise followed a 58% loss over the previous two sessions though Thursday's close at $1.73. The shares are up 873% from their closing price of 26 cents at the end of 2012.

Freddie Mac's shares rose 21% to close at $2.45, following a 27.5% gain on Friday. Friday's action followed a two-day loss of 57% over the previous two sessions through Thursday's close at $1.60. Freddie's common shares are up 842% from their closing price of 26 cents at the end of last year.

Fannie and Freddie, known as the government-sponsored enterprises, or GSEs, which were taken under government conservatorship in September 2008.

The GSEs together hold roughly $5.2 trillion in mortgage loans and mortgage-backed securities, and remain crucial to the U.S housing market as they purchase about 90% of newly originated mortgage loans in the U.S.


Because of its massive bailout of the GSEs, the U.S. Treasury holds $117.1 billion in Fannie Mae senior preferred shares and $72.3 billion in Freddie Mac senior preferred shares. Both GSEs returned to profitability last year, and have been making very significant dividend payments on the senior preferred shares, while private investors holding junior preferreds have had their dividends suspended since September 2008.

Fannie Mae announced on May 9 that it would pay the Treasury a second-quarter dividend of $59.5 billion, after determining it could recapture most of its valuation allowance for deferred tax assets (DTA) at the end of the first quarter. Freddie Mac announced on May 8 that it would pay a dividend of $7 billion to the Treasury in June.

Following the June dividend payments from Fannie and Freddie, the government will have received dividends totaling $131.6 billion on its combined GSE preferred investment of $189.4 billion.

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