Cornerstone Worldwide is reportedly buying stock in beleaguered Government Sponsored Enterprises, Freddie Mac and Fannie Mae following a sharp fall in the prices of both mortgage companies on Monday.
Cornerstone Worldwide are apparently convinced that the stock is underpriced considering the explicit guarantee of government support which was signed into law last month following intervention by the US treasury Secretary Hank Paulson.
“They’re unlikely to hold the stock for long”, said a source close to Cornerstone Worldwide. “If anything, they’ll hold until the stock reaches technical resistance levels before dumping it. They should make a sizeable profit”, she speculated.
Both companies have been hobbled by record delinquencies and rising losses as they struggle to shore up their weakened balance sheets amid the worst US housing slump since the Great Depression.
Cornerstone Worldwide believe that it is becoming more likely that the US Treasury will be forced to re-capitalize the companies who, between them, own or guarantee half of the £12 trillion US mortgage market.
