July 18, 2019 / 2:23 PM / 5 months ago

Fannie Mae, Freddie Mac shares down on 5-year timeline overhaul

(Reuters) - Shares of mortgage guarantors Fannie Mae and Freddie Mac fell on Thursday after the head of the regulator that oversees them said it was his “hope” that they would have exited or be ready to exit conservatorship before his term ends in 2024.

Mark Calabria, director of the Federal Housing Finance Agency (FHFA), which oversees the government-sponsored enterprises, said in an interview at Reuters in New York late Wednesday that he was not operating toward a hard deadline.

“That’s my time horizon,” he said, referring to the end of his term. “I’m under no expectation to try to get all this done. ... So if in four years, nine months they’re not out of conservatorship, I’m not pushing them out.”

Calabria’s comments tempered investors’ expectations for a speedy overhaul of the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) before the 2020 presidential election.

Freddie (FMCC.PK) shares fell 5.5%, and Fannie shares (FNMA.PK) were down more than 5.2% at mid-afternoon.

The pair, which guarantee over half of all U.S. mortgages, have operated under government conservatorship since their bailout during the 2008 subprime mortgage crisis. Washington has struggled for years to devise a plan to safely return them to the private sector.

The stocks have been extremely volatile against that political backdrop, with Fannie closing up or down more than 5% on 23 days this year.

Calabria said he planned to advocate for a guarantee limited to Fannie and Freddie mortgage-backed securities, rather than a government backstop for the companies.

“I think the market has gone a little ahead of itself,” said Vitaliy Liberman, portfolio manager of the DoubleLine Long Duration Total Return Bond Fund (DBLDX.O), which invests in agency mortgage-backed securities.

“It is a question of whether Fannie and Freddie can go private without the involvement of an already-divided Congress. Calabria basically said ‘we are going to delay going to Congress.’”

Editing by Jennifer Ablan, Alden Bentley and Richard Chang

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