Penny Stock Spotlight; Freddie Mac’s Take on Mortgage Rates

Posted by on Sep 02, 2010 | No comment

Freddie Mac (OTCBB: FMCC) today said that U.S. mortgage rates dropped to a record low in the past week. The drop in mortgage rates came after a fall in yields on government debt. The drop in mortgage rates is a good sign for the housing market, which is struggling to recover from the collapse in 2007.

According to a survey released by Freddie Mac today, interest rates on U.S. 30-year fixed rate mortgages averaged 4.32% for the week ended September 2. This is lower than last week’s rate of 4.36% and year-ago rate of 5.08%. Also, 15-year mortgage rates were down from 3.86% to 3.83%.

The drop in the mortgage rates is good news for the housing market, which saw a drop in home sales in recent months.

The collapse in the housing market in 2007 led to the huge losses at Freddie Mac. Freddie Mac was set up to facilitate lending in the mortgage markets so that more and more people could buy their own homes. The company bought mortgages from originators, repackaged them as fixed income securities and sold it to investors, enabling originators to free up capital on their balance sheet and lend more. The system worked fine until problems began to surface in the subprime mortgage market. Finally when the housing bubble burst in 2007, Freddie found difficult to survive on its own.

In 2008, Freddie Mac and Fannie Mae (OTC: FNMA) were taken under government control. Freddie struggled ever since and is still under the government control. The future of Freddie is largely in the hands of the government, which has to decide whether the mortgage market still requires the services of Freddie and Fannie.

The penny stock of Freddie Mac now trades over-the-counter, after being asked to delist from the New York Stock Exchange (NYSE). The Freddie Mac stock was delisted on July 8, 2010.

The penny stock of Freddie Mac has a 52-week range of $0.24-$2.15. The stock is currently trading below its 50-day and 200-day moving averages. The stock has a support level at $0.32 and a resistance level at $0.34.

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