Fannie Mae, the giant government-controlled mortgage backer, has asked for another bailout in the form of a $7.8 billion from the U.S. Treasury. The news is a reminder of the fragile state of the housing and mortgage markets, but homebuilder ETFs have shaken off the concerns to trade higher.
Yet builder ETFs have been top performers over the past month — iShares Dow Jones U.S. Home Construction (NYSEArca: ITB) has bounced over 10%.
SPDR S&P Homebuilders (NYSEArca: XHB) is another ETF that invests in the residential construction sector. [Homebuilder ETFs Rallies 40% From October Low]
Fannie Mae has asked the government for a $7.8 billion in aid that will help the nation’s largest source for U.S. home loans to stay afloat. The company suffered big losses in the third quarter. Furthermore, cash was drained from derivatives that were used to hedge the firm’s exposure to interest rate swings and losses taken from the 2008 credit crisis.
“Fannie Mae is working to reduce losses on our legacy book and limit taxpayer exposure,”Susan McFarland, the company’s executive vice president and chief financial officer, said. [Homebuilder ETFs Rally on Housing data, Rebound Hopes]
Fannie Mae’s revenue stream continues to grow as pre-2009 loans are getting worked off the books, reports Lorraine Woellert for Bloomberg.