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Fannie and Freddie Delisted! What Does it Mean for Real Estate?

You might have missed this little item in the nightly news report; government home mortgage giants Freddie Mac and Fannie Mae are delisting from the New York Stock Exchange. Despite $145 billion in taxpayer funds spent to shore up the pair, shares have dropped so significantly they no longer qualify for inclusion on the exchange but will continue to be traded via the infamous bulletin board instead.

In order to participate in the traditional exchange, shares must trade above $1…Fannie has been below that level for well over a month making delisting a legal necessity. Freddie has continued to struggle at just over the $1 level but will also be delisted given the eventual prospects. Given the difficulty of becoming profitable…much less an actual attempt to repay the government aid, it’s unlikely any serious effort to revive the failing entities will be forthcoming.

Since January of 2010, Freddie and Fannie (with some help from the Veterans Administration) have underwritten nearly all new home mortgages for the year; throw in the assumption of non-performing assets and bail-outs and the combined total for the defunct duo now accounts for nearly half of all the mortgages in the entire nation. With bank lending standards showing little sign of relief, experts are wondering what the delisting of Fannie and Freddie may mean for the future of a struggling real estate industry.

Aside from the loss of shareholder value…which is expected to be significant as neither entity has retained any level of significant value…the immediate impact is expected to be minimal. “Business as usual” is the anticipated motto for the time being. However, experts predict the long term consequences could dramatically alter the landscape of mortgage lending for years to come. There is significant support for privatizing the role of Freddie and Fannie while liquidating assets to recoup some of the anticipated $1 Trillion in losses currently shouldered by the tax payers.

But what would that really entail? According to AEI think tank guru Peter Wallison, a combination of liquidation followed by privatization is the preferred method of reform and would allow both to compete in the marketplace for securitization and the goal of providing affordable housing. Bernake is also an advocate of the privatization plan but suggests the prior operational model was unsustainable prior to the collapse but suggest the new footing would establish a firm foundation going forward. Critics argue this is a rehashing of the same trends that put us here in the first place and seek nationalization instead. Time will tell but as of this writing, it appears there is strong support for a push toward privatizing.

  1. Comment by Unstoppable Family
    June 30th at 10:44 pm 

    “The world is a stage, but the play is badly cast.”
    You got some great material on here, I see why people love your blog so much. Will make sure we subscribe to rss and keep up with your new stuff. Thanks so much for writing. Me and my family are on 3 year trip around the world having a blast. Come visit our blog we update with all types of crazy stuff.

    Unstoppable Family
    Brian and Rhonda Swan

  2. Comment by Tanya Crane
    July 1st at 9:45 pm 

    There are many benefits in the real estate IRA. One of the key benefits is that the real estate IRA decreases or entirely eliminates the custodial costs. It is also very simplistic to set up a real estate IRA.

  3. October 26th at 11:48 pm 

    Is there way to know if you are delisted?

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