Big investors stay with Fannie, Freddie despite lawmakers' plans

Wed Mar 12, 2014 5:36pm EDT
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By Svea Herbst-Bayliss

BOSTON (Reuters) - A Senate proposal for winding down Fannie Mae and Freddie Mac slammed their shares over the last two days, but big investors in the government-owned mortgage agencies aren't running away yet.

Fannie FNMA.OB and Freddie FMCC.OB shares fell 12 percent and 17 percent, respectively, on Wednesday, one day after Senate Banking Committee leaders agreed on a framework for a bill to draw down the lenders.

The sharp decline has hit big-name hedge funds which jumped into the once-failing companies as the housing market rebounded, including William Ackman's $12 billion Pershing Square Capital, Fannie Mae's biggest shareholder.

Despite this week's losses, several investors said they plan to stay the course, acknowledging that they were aware they had invested in such volatile stocks.

Senate Banking Committee Chairman Tim Johnson, a Democrat, and Senator Mike Crapo, the panel's top Republican, outlined a framework for legislation on Tuesday after months of talks that included input from the Obama administration. They said they intended to introduce a bill soon.

But several hedge fund managers, which often lock up their wealthy investors' money for years and therefore have the ability to stick with investments for a long time, said they would be patient and wait.

"There are a lot of details to be worked out, and there was no secret that Congress was planning to do this," said one investor who owns hundreds of thousands of shares and asked not to be identified by name.

Fannie Mae shares fell 49 cents on Wednesday to $3.54 a share on 124 million shares traded on OTCMarket. Freddie Mac ended down 68 cents at $3.36 a share on volume of 61 million shares.   Continued...

The headquarters of mortgage lender Fannie Mae is shown in Washington September 8, 2008. REUTERS/Jason Reed