Steve Mnuchin Wants To Reform Fannie And Freddie, But It Might Not Happen Before 2019

Federal National Mortgage Association (OTC: FNMA) and Federal Home Loan Mortgage Corp (OTC: FMCC) investors suffered yet another disappointment Monday when Treasury Secretary Steven Mnuchin clearly stated he never said Fannie and Freddie would be privatized, news that sent shared of the government-sponsored enterprises tumbling.

Fannie And Freddie Versus The White House

In addition, the administration does not plan on advancing housing reform legislation in the first half of 2017. Instead, the target date for reform of Fannie Mae and Freddie Mac is likely late 2017 or early 2018.

Fannie Mae shares are down another 3.2 percent on Tuesday after a 5.8 percent drop Monday, and Height Securities analyst Edwin Groshans said 2018 may even be too optimistic.

“Our view is that housing finance reform does not occur before the 2018 election,” Groshans explained.

“This does not mean that housing finance cannot move forward, but it seems unlikely to move anytime soon given that the first vote on the American Health Care Act did not take place until after months of negotiating, the timeline for tax reform has been pushed into the back half of 2017, and the timing for a second House vote on AHCA is uncertain.”

Groshans said housing finance reform will likely be taken slowly and deliberately by both parties in Congress because the potential negative consequences of a legislative misstep could impact every district of the country. While it seems like the discussion surrounding reform has heated up since the election, there is still no piece of actual legislation addressing the issue.

For now, at least, it looks like more of the same for Fannie and Freddie shareholders — watching, waiting and hoping.

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Image Credit: By Vice President Pence @ twitter - Caption, Picture URL, Public Domain, via Wikimedia Commons