U.S. mortgage financier, Fannie Mae, is reportedly planning to sell mortgage bonds worth $1 billion in an upcoming private auction slated to be held Thursday, July 11. The lender will be selling these bonds without any involvement or backing from the government, according to several media reports.
Fannie Mae is selling off its "hard-to-trade" assets and plans to use the proceeds from the sale to repay the government loans, which it received during the housing crisis. It had received an aid of $116 billion when the housing market crashed in 2007-08.
The Federal Housing Finance Agency (FHFA) urged Fannie Mae to sell off at least 5 percent of its illiquid assets by the end of 2013. Therefore, the company has been trying to shed most of its non-tradable assets. Earlier in May, Fannie had held a similar auction where it sold mortgage backed bonds worth $2 billion, reported Money News.
It also plans to pay back $59.4 billion, which would keep the government coffers full for some time. With that imbursement, the firm would have paid off $95 billion of the total debt. However, it will still have to repay $21 billion of the loan.
"We are working with FHFA to meet the goals of the conservatorship scorecard for 2013," Andrew Wilson, a spokesman for Fannie Mae, said in a telephone interview with Bloomberg.
The auction comes at a time when concerns have been mounting over the Federal bank's plans of cutting its bond-purchasing scheme. Investors usually believe that agency-backed bonds yield better profits. However, over the past few years, issuance of non-government securities has mapped a slow albeit steady growth.
According to Reuters: Money managers talked of the advantages of non-agency mortgage loans believing interest rates will rise on a surging home market.
Meanwhile, the government is diligently working on various proposals to determine a new future for the now-profitable lending giants- Fannie Mae and Freddie Mac. Read more on the story,here.
