Fannie, Freddie Expand Portfolios Ahead of Possible Public Offering

Core Insights - Fannie Mae and Freddie Mac have significantly increased their mortgage-backed securities and home loans, aiming to lower lending rates and enhance profitability ahead of a potential secondary offering [1][5]. Company Overview - Fannie Mae and Freddie Mac are large government-sponsored enterprises designed to support the home loan market, facilitating easier access to mortgages [2][3]. - They underwrite over 50% of all mortgages in the U.S., providing financial guarantees on mortgage bonds, which is essential for financing home loans [3]. Financial Activities - In addition to their primary business of providing financial guarantees, they also purchase mortgage bonds and home loans, generating revenue through these investments [4]. - Since June, their investment portfolio has grown by approximately 25%, reaching around $233 billion, within a broader agency mortgage bond market valued at about $9 trillion [5]. Market Expectations - Analysts predict that Fannie Mae and Freddie Mac may add an additional $100 billion to their portfolios, although the exact trajectory remains uncertain due to limited communication from the companies and their regulator [6]. - The strategy of increasing their investment portfolios is seen as a way to improve earnings, which is crucial for any future public offering [7][8].