Fannie Mae and Freddie Mac fell in New York trading after FBR Capital Markets’ Paul Miller said the mortgage-finance companies had no “underlying value” to justify a more than tripling in their share prices this month.
“There is no fundamental value remaining in Fannie and Freddie, particularly since the government owns 80 percent of each company,” Miller, a banking analyst based in Arlington, said in a note to investors today.
Fannie Mae dropped 11 cents, or 5.4 percent, to $1.93 today in New York Stock Exchange composite trading. Freddie Mac declined 11 cents, or 4.6 percent, to $2.29.
The shares last week climbed to their highest levels since regulators seized Fannie Mae and Freddie Mac in September as mortgage delinquencies climbed. Fannie Mae closed at $2.04 on Aug. 28, up 252 percent for the month. Freddie Mac finished at $2.40, a 287 percent jump for the month to date.
Miller’s note reiterated comments he made in an interview on Aug. 28 about the two government-sponsored enterprises.
“There’s no value,” Miller said in that interview. “This is all speculation.”
Investor speculation that Fannie Mae and Freddie Mac would pursue reverse stock splits to boost their share prices is overblown, and there’s “no relief in sight” to the companies’ record losses, Miller said.
Miller noted that the companies said in securities filings that their boards didn’t support reverse splits.
Fannie and Freddie, the largest U.S. mortgage finance companies, have booked a combined $165.3 billion in quarterly net losses over the past two years and have received or requested $95.6 billion in taxpayer aid since November.
The Obama administration is considering options to restructure the companies next year, including a wholesale liquidation or splitting off their bad assets into a separate government-backed entity.
