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Here's Why Fannie Mae and Freddie Mac Stocks Are Rising Today

What happened

On Wednesday afternoon, it was reported that the U.S. Treasury Department is getting close to releasing its plan to reform Fannie Mae (NASDAQOTH: FNMA) and Freddie Mac (NASDAQOTH: FMCC). The finalized plan is expected to be announced as early as September.

Investors appear to be pleased with the news. By 10:45 a.m. EDT on Thursday, shares of Fannie and Freddie had risen by more than 9% and 7%, respectively.

Image source: Getty Images.

So what

To say that Fannie and Freddie's investors have been waiting a long time for some clarity on the future would be a major understatement. Since being rescued by the government in the wake of the financial crisis, all profits of the two agencies have been swept away by the Treasury.

Fannie and Freddie received a combined $191 billion as part of the financial crisis bailout and have since repaid the entire amount plus $105 billion. So it's not a surprise that many people (government officials and private investors alike) feel that it's time to release the agencies from government control.

Now what

It's important to mention that the details of the Treasury's plan remain quite unclear at this point. We don't know anything about a proposed timetable or how future profits would be allocated, or how the recapitalization of the companies would take place.

What we do know is that the Trump administration is strongly in favor of returning both companies to private shareholders and to make sure both are adequately capitalized before it happens. The details of the finalized plan could move the stocks dramatically in one way or the other, but for now this is a welcome development for patient shareholders.

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Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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