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Dotzour’s Take on Freddie and Fannie Collapse

(TX A&M Real Estate Center) – Freddie Mac and Fannie Mae stocks plunged this week, increasing fears over their ability to raise the capital they need to purchase home loans and hold down mortgage rates.

Freddie Mac shares fell 22 percent to $8 yesterday, while Fannie Mae stock lost 13.8 percent to close at $13.20.

Dr. Mark Dotzour, chief economist with the Real Estate Center at Texas A&M University, said it seems increasingly likely that the U.S. government is going to nationalize these two mortgage giants, and he sees that as a good thing.

“The concept of Fannie and Freddie is a good one,” he said, “but they have made some mistakes and squandered the value of the stockholders. Once the government takes over, the stockholders will be washed away but the bondholders will probably be bailed out.”
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Posted by Steve
10 years ago