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Investing.com - Keefe, Bruyette & Woods has reiterated its "Underperform" rating on Fannie Mae (OTC:FNMA) and Freddie Mac (OTC:FMCC) shares, citing potential dilution risks for common shareholders in the event of privatization.
The firm believes that Government-Sponsored Enterprise (GSE) privatization efforts will likely begin in early 2026, with the probability of success having "increased meaningfully over the past six months." With a market capitalization of $43.2 billion and a "GOOD" Financial Health Score according to InvestingPro, Freddie Mac appears well-positioned for potential privatization.
KBW analyst Sanjay Sakhrani noted that President Trump has publicly stated his goal to take the companies public, with other administration officials supporting this position.
The firm expects GSE privatization to proceed through administrative channels rather than through Congress, though Congressional hearings may occur once the process begins.
KBW indicated that preferred shareholders face more favorable potential outcomes compared to common shareholders, as preferred shares "are not directly exposed to dilution risk" and preferred shareholders "can hold up the process if they don’t get agreeable terms."
In other recent news, Freddie Mac reported that the 30-year fixed-rate mortgage averaged 6.35%, marking a 15 basis point decline from the previous week. This represents the largest weekly drop in mortgage rates over the past year. Deutsche Bank initiated coverage on Freddie Mac with a Buy rating and set a price target of $25.00, indicating potential upside for investors. Meanwhile, Keefe, Bruyette & Woods maintained an Underperform rating on Freddie Mac, despite projecting strong earnings for the company. Additionally, comments from U.S. Federal Housing Finance Agency Director William Pulte suggested a significant valuation for Freddie Mac, ranging from $500 to $700 billion, with potential for further growth. These statements have generated increased interest in the company’s stock. Freddie Mac continues to be a focal point for investors, with varying perspectives from analysts on its future prospects.
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