(Bloomberg) -- Polls showing an upswing for President Donald Trump’s re-election chances against top potential Democratic candidates favor housing finance and mortgage giants Fannie Mae and Freddie Mac, according to Height Capital Markets.
Under a continued Trump administration, the Federal Housing Finance Agency is likely to allow Fannie and Freddie to raise capital and exit conservatorship in 2021 and 2022, Height analyst Edwin Groshans wrote in a note. He cited polls, including a Dec. 16 USA Today survey, showing Trump leading Democratic rivals.
“In 2020, we expect significant progress” on both administrative and legal fronts, Groshans said, including ending the so-called “net worth sweep” of Fannie and Freddie’s profits to the Treasury. “While the process is taking significantly longer than we initially projected, the momentum continues to be positive,” he said.
Earlier, Cowen & Co. senior policy analyst Jaret Seiberg flagged the Senate confirmation of Mark Calabria as FHFA director in a note on the year’s dominant policy issues. Seiberg said that Calabria has “done more in six months to advance the recap and release of Fannie and Freddie from conservatorship” than all his predecessors combined. “Recap and release” refers to the process of bolstering the companies’ ability to absorb losses and then returning them to private ownership.
Common shares in Fannie Mae have soared 188% this year, and Freddie Mac by 175%, on optimism that change is coming to the housing finance system. Fannie gained as much as 1.7% in Tuesday trading; Freddie rose as much as 2.1%.
Height’s Groshans maintained a buy rating on all series of the junior preferred shares of Fannie and Freddie. He rates the common shares of both hold.
(Michael Bloomberg is seeking the Democratic nomination. He is the founder and majority shareholder of Bloomberg LP, the parent company of Bloomberg News.)
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