Will Fannie-Freddie's Policy Change Impact Housing Sector? - Analyst Blog

The Federal Housing Finance Agency (FHFA), regulator of Federal National Mortgage Association ( FNMA ) and Federal Home Loan Mortgage Corporation ( FMCC ), gave the green signal to both the housing mortgage giants to offer the homeowners of foreclosed properties an opportunity to purchase their homes back at lower prices.

Previous Policy

Under the FHFA's prior guidelines, Fannie Mae and Freddie Mac could sell the foreclosed properties back to the homeowners at the outstanding mortgage amount. There was no respite for the borrowers earlier. Only new buyers could purchase the properties at market prices.

Revised Policy

Under the new policy, the opportunity to repurchase home at the current market price has been extended to the former homeowners as well. However, this modification is applicable only on the 121,000 single-family homes owned by Fannie Mae and Freddie Mac as of Nov 25, 2014. Moreover, certain properties may be prohibited from being included under the revised policy.

Purpose behind the Change

The FHFA has been working actively to encourage more lending as well as accelerate the housing market recovery. Last week, it revised rules to bring more clarity in the process of buying back loans sold to these two federal mortgage finance agencies. This is expected to transform lenders' perception of risks involved in repurchasing loans.

The latest move will help in stabilizing property value as well as decrease the number of vacant properties with rising number of prospective home buyers, lured by the lower price incentive.

Our Take

The FHFA's policy shift will be appreciated by the homeowners as well as democratic lawmakers, who stress on the need to liberalize the FHFA policies in favor of troubled homeowners. On the flip side, some people may take undue advantage of these relaxed policies through surplus borrowing, which will likely strain the financials of the mortgage agencies.

Both Fannie Mae and Freddie Mac currently carry a Zacks Rank #3 (Hold). Some better-ranked stocks in the mortgage investment industry include Essent Group Ltd. ( ESNT ) and Walker & Dunlop, Inc. ( WD ). Both these stocks sport a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

FREDDIE MAC (FMCC): Get Free Report

FANNIE MAE (FNMA): Get Free Report

WALKER & DUNLOP (WD): Free Stock Analysis Report

ESSENT GROUP (ESNT): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos


Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

Learn More