Freddie Mac and Fannie Mae share prices rise on 100 Mortgages

Pressure has eased off for U.S. Treasury Secretary Henry Paulson to step in with a bailout the two U.S. mortgage finance companies Freddie Mac and Fannie Mae, this comes as Freddie Macs shares rose 20 percent on Tuesday and Fannie Maes 8 percent, and this has pleased investors.

This will now enable the two companies to offset some of the credit losses on mortgages they own or guarantee. An analyst at Credit Suisse Group in New York said “From Fannie and Freddie’s perspective, there are actually better investments now,” it’s also said that their interest margin is probably going to continue to widen ironically.

Congress created the two mortgage finance companies to provide market stability and grow homeownership. Freddie Mac and Fannie Mae make their money by buying mortgages from banks, funding their purchases with low-cost debt, and by guaranteeing home-loan securities.

Fannie Mae said last month that net interest income rose to $2.1 billion in the second quarter, from $1.7 billion in the first quarter. According to Credit Suisse the company’s profit on investment has expanded.

This is slightly better news for the two mortgage finance giants who reported $14.9 billion of losses in the past four quarters.

Source: bloomberg

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Comment by Regina — December 17, 2008 @ 2:56 am