Losses grow as Freddie Mac and Fannie Mae stocks delisted from NYSE

Freddie Mac and Fannie Mae, the key sources of funding which have kept lending to home buyers from totally drying up, were ordered by the government to cease trading their shares on the New York Stock Exchange to abide by NYSE delisting rules. Freddie Mac and Fannie Mae stocks, which have already lost nearly all their value, fell further when the markets got the news. After the delisting, which was ordered for failing to meet NYSE needs for maintaining price levels, the stocks of the two companies will be traded within the over-the-counter market now rather than before.

Article Resource: Freddie Mac and Fannie Mae stocks delisted from NYSE, losses grow

NYSE delisting guidelines

Freddie Mac and Fannie Mae were delisted because NYSE delisting rules require that a business pull its stock if it can’t take action to keep shares from dropping below the $ 1 average price level for 30 trading days that is needed. The Associated Press reports that following the NYSE delisting announcement had been made, Fannie Mae shares dropped 42 cents, or 46 percent to 50 cents, while Freddie Mac slid 55 cents, or 45 percent, to 67 cents. In the year of 2007, both companies shares traded at a lot more than $ 60. As the housing crisis deepened, the stocks lost almost all of their value as they went below $ 1 by September 2008. Freddie and Fannie were both taken over by the government.

Losses for Freddie Mac and Fannie Mae

31 million homes worth $ 5.5 trillion are guaranteed by these companies. That's around half of all US mortgages. CNNMoney.com reports that since September 2008, the Treasury Department has poured $ 83.6 billion into Fannie Mae and $ 61.3 billion into Freddie Mac to cover losses. During the housing crisis, the money has kept lending to home buyers alive, kept home sales from falling further than it has, and kept homes from losing more value than they have. But Freddie Mac/Fannie Mae losses totaled $ 93.6 billion in 2009 and another $ 18.2 billion in the first quarter this year. The Congressional Spending budget Office estimates that nearly $ 400 billion in tax dollars can be needed at some time to cover Freddie Mac/Fannie Mae losses, making it probably the most expensive of all the government bailouts.

Delisted Fannie Mae and Freddie Mac stock by July 8

By July 8th, Freddie and Fannie could have delisted from the NYSE. The Wall Street Journal reports the NYSE delisting meets the goals of government conservatorship. Fannie and Freddie will save $ 500,000 a piece in annual listing fees by delisting. Both companies ended up paying the maximum amount.

OTC stock for Fannie and Freddie

After July 8, Fannie and Freddie stock could be traded over the counter. Brokers will negotiate directly with one one more for Fannie and Freddie stock over computer networks and by phone. OTC stocks are typically very risky because they’re the stocks that are not considered stable enough to trade on the New York Stock Exchange. Research about these stocks is also harder to find. With the delisting, David Lutz, managing director of equity trading at Stifel Nicolaus and Co. in Baltimore, explained to Business Week that "We lose some transparency into what is basically a large black hole that is eating up a large part of our bailout funds."

A lot more details on this topic

Associated Press

google.com/hostednews/ap/article/ALeqM5gKpMFnJoJc8QkAW3abF41E4d492QD9GCEEC00

CNN Money.com

money.cnn.com/2010/06/16/news/fannie_freddie_delisting/

Wall Street Journal

online.wsj.com/article/SB10001424052748704198004575310443796994402.html?mod=rss_Today’s_Most_Popular

businessweek.com

businessweek.com/news/2010-06-16/fannie-freddie-plunge-after-moving-to-delist-shares-update2-.html