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Any Fannie, Freddie IPO Would Be Years Off, Raymond James Says

Before an IPO, the GSEs would need to build from $200 billion to $250 billion in capital reserves, any analyst writes.

(Bloomberg)—A long list of “preparatory steps” means that any potential Fannie Mae and Freddie Mac initial public offerings are at least three to four years away, according to Raymond James.

Before any IPO, analyst Ed Mills wrote in a note, the mortgage giants, or government- sponsored enterprises (GSEs), need to build around $200 billion to $250 billion in capital reserves. The question of how much money they send to the U.S. Treasury Department has to be addressed, too. And Mills expects Fannie and Freddie to need several years of “established earnings history” under new rules as well.

That’s not all. Other open issues include: The qualified mortgage, or QM, "patch"; the future of GSEs’ multifamily businesses; potential changes to underwriting standards; any impact on the new uniform mortgage-backed security, and “how any implicit or explicit government backing would work.”

Mills also cautioned that “the results of the 2020 elections could add some friction to the process,” if Democrats recapture the White House and make gains in Congress.

Fannie Mae shares have soared 200% so far this year, while Freddie’s have rallied 188%, boosted by speculation government changes will benefit shareholders. The stocks jumped in the wake of Donald Trump’s 2016 election, then fell amid pessimism about the outlook for mortgage finance overhaul.

To contact the reporter on this story: Felice Maranz in New York at [email protected] To contact the editors responsible for this story: Catherine Larkin at [email protected] Scott Schnipper

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TAGS: Multifamily
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