Share prices are mixed for US mortgage giants

14 July 2008 20:48  [Source: ICIS news]

HOUSTON (ICIS news)--Stock prices were mixed on Monday for the two companies that own roughly half of the outstanding mortgages of the US, following proposed plan by the government to assist the firms.

The US Department of the Treasury has proposed a three-part plan to shore up the two companies, Fannie Mae and Freddie Mac.

The department said it would temporarily increase the line of credit that the companies have with the Treasury. In addition, the Treasury could buy equity in the companies for a limited time.

The Federal Reserve (Fed) would also be able to consult with regulators to establish capital requirements and other criteria for the companies.

The proposal needs approval from Congress.

Reaction to the plan was mixed. Fannie Mae shares were trading at $10.32 (€6.50) on the New York Stock Exchange, up 0.68%.

Freddie Mac shares were trading at $7.54, down 2.71%

Fannie Mae and Freddie Mac are government-sponsored entities, so called because they were chartered by Congress.

They were created with the intent of promoting home ownership in the US. Fannie Mae and Freddie Mac buy mortgages from primary lenders.

By making such purchases, Fannie Mae and Freddie Mac replenish capital to the primary lenders, which can then issue more house loans.

During the past year, shares for Fannie Mae and Freddie Mac have plummeted with the US house market.

Freddie Mac had traded at $67.20 on 17 August. Shares of Fannie Mae had reached $70.57 on 22 August.

The house industry is a key end market for chemicals, in that each house has an average of $16,000 worth of chemistry.

Products used to build houses include roofing materials, adhesives, insulation, siding, paints and coatings, synthetic materials, polyvinyl chloride (PVC) pipes and a broad range of other construction materials.

($1 = €0.63)

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