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$1.20 -0.09 (-6.98%)
10/7/2008 4:00 PM

Fannie Mae (FNM)

CAPS Rating:
**

A shareholder-owned company, which provides affordable housing capital to local communities in order to serve the U.S. housing market.

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Avatar printingpress (45.72) Submitted: 5/10/08 12:40 AM : Outperform Start Price: $27.83 FNM Score: -67.52

Look, the financial market has taken a beating. Fannie is down like a dog. BUT, they are a huge player in the market. As the wall street firms shy away from mortgages, Fannie Mae now has a 50% market share. They are controlling the market by restricting guidelines and increasing their gurantee fee (i.e their profit stream). So, they are buying more loans, of better quality than in the past 5 years, and are getting a higher premium for the lower risk. Sure they have losses coming pretty soon. But they also have recourse (put the fraud back on the sellers).. so I think they'll so just fine in the end.

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Avatar GavshireHathaway (81.78) Submitted: 5/30/08 2:58 PM

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Increasing market share is only a good thing if you are selling a profitable product. The fact that other lenders are not willing to make loans into the face of deteriorating home values should be a huge red flag. FNM has been tasked with the unenviable position of stabilizing the mortgage market to create a floor for home prices. They are thus taking the bullet for other lenders, and continued deterioration of their portfolio is likely to wipe out ALL of their equity. It is likely the government will step in to bail out their debt obligations (though not certain), but it is unlikely that shareholders will receive much in the case of a government bailout. See Bear Stearns.

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