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ian said |
| 2 years 9 days ago |
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Fannie and Freddie are toast - down 20% last week
Recently, however, there has been growing concern about Fannie and Freddie's portfolios, specifically what are called private-label mortgage securities they have bought from others and do not guarantee, says Joshua Rosner, managing director of research firm Graham Fisher.
Private-label securities make up almost one-third of Freddie Mac's retained loans. Although they are generally very high quality, investors today are suspicious of anything that is not guaranteed.
The bigger problem is that many hedge funds, REITs and other investors who have been getting margin calls on their lesser-quality collateral have been raising cash by selling Fannie and Freddie securities. That is driving down their price relative to Treasurys.
On Thursday, the U.S. Treasury Department denied a rumor that it is going to explicitly guarantee Fannie and Freddie, which did nothing to help the Fannie/Freddie selling frenzy.
In a news release on Friday, Carlyle Capital said, "In the past several days, there has been a rapid and severe deterioration in the market for U.S. government agency AAA-rated residential mortgage-backed securities" such as those issued by Fannie and Freddie.
In response, several of Carlyle's lenders marked down the value of its collateral and said they would soon ask for more. "The company believes these additional margin calls and increased collateral requirements could quickly deplete its liquidity and impair its capital," it said.
On Friday, the Dutch stock exchange where Carlyle Capital is listed halted trading in its shares.
Fannie and Freddie's shares fell almost 20 percent last week.
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