Shares Of Freddie Mac, Fannie Mae Tank On Housing-Finance Reforms

(RTTNews) - Key Democrat and Republican senators in Senate Banking Committee on Tuesday announced having reached a bipartisan agreement to reform a U.S. housing finance system and to wind down Freddie Mac (FMCC.OB) and Fannie Mae (FNMA.OB).

Shares of mortgage guarantors Fannie Mae and Freddie Mac were down 30 and 25 percent, respectively, after the statement on the reform was released.

Senate Banking Committee Chairman Tim Johnson and Ranking Member Mike Crapo said they have reached an agreement on a housing finance reform proposal that will be released publicly soon, with plans to hold a markup in the coming weeks.

The bipartisan agreement, drafted with backing from President Barack Obama's administration, calls for replacing mortgage guarantors with new system of government-backed mortgages.

Obama administration have been in discussion to wind down Fannie Mae and Freddie Mac, and reform the current housing finance system to prevent the need for another government bailout of the mortgage giants.

Freddie Mac and its sister concern Fannie Mae went bankrupt after the 2008 financial crisis and had to lean on federal aid aggregating about $190 billion.

"There is near unanimous agreement that our current housing finance system is not sustainable in the long-term and reform is necessary to help strengthen and stabilize the economy. This bipartisan effort will provide the market the certainty it needs, while preserving fair and affordable housing throughout the country," said Chairman Johnson.

"This agreement moves us closer to ending the five-year status quo and beginning the wind down of Fannie and Freddie while protecting taxpayers with strong private capital, building the components for a stable secondary market and avoiding repeating the mistakes of the past," Crapo said.

FMCC.OB is currently trading at $4.00, down $1.52 or 27.54%, while FNMA.OB is trading at $4.02, down $1.80 or 30.93%.