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Fannie, Freddie to delist their shares

By Lorraine Woellert
Bloomberg News / June 17, 2010

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WASHINGTON — Fannie Mae and Freddie Mac, the mortgage firms 80 percent owned by US taxpayers, plunged yesterday after regulators told them to delist their shares from the New York Stock Exchange.

The Federal Housing Finance Agency, which has overseen the two companies since 2008, ordered the delistings after the New York Stock Exchange told Washington-based Fannie Mae that its shares no longer met its standards, said Edward DeMarco, the FHFA’s acting director.

“A voluntary delisting at this time simply makes sense and fits with the goal of a conservatorship to preserve and conserve assets,’’ DeMarco said yesterday. The delistings are expected to be effective in early July.

Fannie Mae and McLean, Va.-based Freddie Mac, which own or guarantee more than half of the $11 trillion US mortgage market, have been at risk of delisting since September 2008, when they were seized by regulators at the height of the credit crisis. Shareholders include Vanguard Group, Blackrock Inc., Kinetics Asset Management, and California’s state pension fund. Some funds are precluded from owning stocks that aren’t listed on an exchange.

Fannie Mae shares fell 36 cents to 52 cents, while Freddie Mac stock fell 48 cents to close at 75 cents yesterday. The companies, which are expected to trade on the Over-the-Counter Bulletin Board, will file reports with the Securities and Exchange Commission after the delisting, DeMarco said.

The Treasury has injected $145 billion into the firms since 2008 to keep them solvent amid rising foreclosures and defaults of mortgages on their books. Treasury Secretary Timothy F. Geithner has promised to support the companies while Congress weighs an overhaul of the nation’s mortgage-finance system. Taxpayer aid could climb to hundreds of billions of dollars.

“The delisting is really symbolic,’’ said David Kovacs, head of quantitative strategies at Berwyn, Pennsylvania-based Turner Investment Partners. “The equity value should’ve been wiped out a couple of years ago,’’ Kovacs said.

Credit-rater Standard & Poor’s maintained its 12-month target price of $1.50 on shares in the two companies.

“The US government will continue to provide financial support’’ to the firms, S&P analyst Rafay Khalid said.

Since the government took control of the companies, their shares have hovered near the NYSE minimum 30-day rolling average closing price requirement of $1.