FNMA - Fannie Mae: An Indirect Bet On Trump Polling Numbers

2024-06-30 03:29:44 ET

Summary

• Fannie Mae's value has rocketed higher following the Trump-Biden debate, implying it is an indirect bet on a Trump win.
• Historically, Trump is far more likely to end FNMA's conservatorship than the Biden administration.
• There are no guarantees that Trump will successfully end the conservatorship, having not done so in his last term. Further, FNMA's fundamental risks would not necessarily decline in this scenario.
• Fannie Mae's book value should be below its market value by 2027-2028 at its current income level, given it continues to retain its profits.
• Although home prices seem likely to decline, Fannie Mae's exposure is limited because very few people are obtaining mortgages at today's extremely low affordability levels.

The Federal National Mortgage Association, or "Fannie Mae" ( OTCQB:FNMA ), has avoided significant headlines in recent years. The government-sponsored enterprise remains in conservatorship under the Federal government roughly sixteen years after its failure. Fannie Mae and its peer, Freddie Mac ( OTCQB:FMCC ), are the primary mortgage insurance providers to qualified or "agency-backed" mortgages, backing around 70% of US mortgages . Most mortgages are pooled into mortgage-backed securities or "MBS," such as those seen in the ETF ( MBB )....

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