Mortgage Issues
| The losses on outstanding mortgage obligations could force bankruptcy and a government takeover, which means that equity investments in the company may be worth nothing. Mortgage loans are not worth what was paid for them, but their value is still unknown. This increases uncertainty risk for the company, increases the discount rate applied to future cash flow and decreases the value of the stock. When this uncertainty is settle, then the stock will rise, because their is less risk to future cash flows.
Estimating losses are nearly impossible, because the mortgages were secularized with of many other mortgages. The best way to measure losses is to compare the percentage losses from other banks with similar mortgages. If banks post larger losses than normal, then FNM will suffer disproportionately more. WikiWealth needs your help. How does this discussion…
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