If you like that you can have a 30-year loan at a fixed rate, then you like the New Deal’s Federal National Mortgage Association (FNMA, or Fannie Mae).

During the Great Depression, banks were running short of funds and needed to be careful because – believe it or not – there was a time when a bank having no money meant it was no longer a bank.

For more info on why that’s no longer true, click here. To learn more about Fannie Mae, read on.

What Is Fannie’s Purpose?

Fannie Mae is not your lender. You cannot go to it and get your loan. However, it may buy your loan after a bank completes the process. Among the reasons a bank would like to sell your loan is that it made a fair amount of money on the initial fees, and then some more from payments you made, but rather than build wealth slowly and steadily, it would like to sell your proven/reliable loan to someone else and then take another risk on another loan.

Sometimes the bank sells it to another bank. The first home I bought had a mortgage through Countrywide Home Loans, which then sold it to Wells Fargo. My current home mortgage was originated by a small, local brokerage, and now is held by a larger one.

As I make my payments every month, more conservative banks want to hold the note, and more liberal ones want to get me off of their books to start the process again.

Unfortunately, in the early 2000s, Fannie Mae had too many bad loans and lost money. Among the results is that it has been held in conservatorship for about 15 years, and it’s share price (yes, it’s a government backed entity, but also a publicly traded company) has been a pink sheet asset, or a penny stock, which are explained fairly well in “The Wolf of Wall Street,” and do not seem in line with Fannie Mae’s current financials or operations.

 

Fannie Going Bankrupt?

Conservatorship is a process where a company gets very special attention so as to save it. Back in 2008, on the verge of collapse, this made sense for Fannie Mae.

However, a 5-year lookback on its income statement shows that it has posted annual profits from $11 billion to $22 billion. Amazingly………better post disclaimers…….

****Do not take stock advice from a guy studying history****

****Investment in securities are subject to market risks, please carry out your due diligence before investing****

****And last but not the least, past performance is not indicative of future returns****

……….Amazingly, the share price is way down in the dumps. I personally picked up some shares at $0.40 last year.

DISCLOSURE ON TOP OF MY DISCLAIMERS: I know the little that I do because I’ve been following it since it 10x’d back in 2013, but held off on buying shares until a few years ago. I consider it a gamble, which I discuss in more detail on this forum.

Fannie May Soon Be History. Will It Also Make History?

The New Deal is an important part of American history. Hilariously, it wasn’t really a plan until after FDR won the election. He was going around talking about all kinds of stuff, and at one point said something like, “I’m sick of these fair deals, and square deals, and old deals. We need a new deal!”

People went bananas.

Like any performer who crushes it, the line was used again and again, and folks got excited. Meanwhile, poor Herbert Hoover was enacting policies that were something of a lead-in to New Deal reforms, but had no idea what FDR’s plans were. “New Deal” was mostly an applause line until after he was elected, as admitted by Secretary of Labor, Frances Perkins, which can be read about a little bit on pg 20 of The Little Girl Who Fought the Great Depression: Shirley Temple and 1930s America, by J.K. Kasson.

Now that Fannie Mae’s peerless profitability has been repeatedly proven, some may wonder, why is it still being babysat by the government? Going back to 2010, it posted a Q4 profit of $73,000,000. Since then, it’s consistently made millions, and then billions.

If it was a billion-dollar-plus loss that put them into conservatorship, it stands to reason that making tens-of-billions would pull them out of it.

And this is where an interesting piece of history might be made. Just as we had an absurd amount of new millionaires from vehicles like Bitcoin, shares of GameStop, and the 1990’s tech boom, investors in companies like Fannie Mae (and Freddie Mac) may find themselves 10x-ing their money, or more.

Some believe the correct share price is over $20, but frenzies driven by greed have put stocks well over their real value, and it wouldn’t be impossible for the share prices to eclipse $100. Back before it crashed, it was not that far off.

Am I saying you should buy this stock? No, because…….

****Do not take stock advice from a guy studying history****

****Investment in securities are subject to market risks, please carry out your due diligence before investing****

****And last but not the least, past performance is not indicative of future returns****

…….but I’m buying shares. I’m buying them slowly with the idea that I may be throwing all of that money away, because there’s no way to know if I’ll be a part of a tiny historical moment in the financial markets, or nothing at all.