Trump Says US Will Retain ‘Implicit’ Guarantees Of Freddie Mac, Fannie Mae: Retail’s Over The Moon

Freddie Mac (FMCC) and Fannie Mae (FNMA) stocks drew bullish chatter on Wednesday after President Donald Trump said that the U.S. would continue to retain guarantees and its oversight role in the mortgage firms.

Trump’s assurance comes amid his efforts to make the mortgage giants public, a longstanding demand of hedge funds and shareholders.

"I am working on TAKING THESE AMAZING COMPANIES PUBLIC, but I want to be clear, the U.S. Government will keep its implicit GUARANTEES, and I will stay strong in my position on overseeing them as President," Trump said in a Truth Social post.

Last week, he stated that he was giving the process “very serious consideration” and would consult with senior members of his cabinet before making a decision.

Fannie and Freddie buy mortgages from lenders and either hold these mortgages in their portfolios or package the loans into mortgage-backed securities, with a guarantee of protection from the government regarding any losses.

The federal government took control of these now-profitable companies after the 2008 financial crisis.

Trump allies and other Republicans believe that privatizing the two companies could boost the government’s coffers at a time when the federal debt has surged past $36 trillion.

However, analysts said privatization efforts must be carefully crafted to mitigate the risks of increasing mortgage prices.

According to The Fly, Keefe Bruyette analyst Bose George states that there remain "meaningful hurdles" to the privatization efforts. Still, the implicit guarantee would be a meaningful step towards making the reform work.

However, the brokerage continues to believe that the stock would have a significant dilution risk if the government-sponsored entities were to be privatized.

Retail sentiment on Stocktwits about both stocks was ‘extremely bullish’, while retail chatter was ‘extremely high.’

“WHO IN THEIR RIGHT MIND WOULD SELL??” one retail trader wondered.

Another retail trader suggested that both stocks could double soon.

Freddie Mac and Fannie Mae have both more than doubled year-to-date (YTD).

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