WASHINGTON, DC-The Federal Housing Finance Agency is directing Fannie Mae and Freddie Mac to delist their stock from the New York Stock Exchange because their stock has not maintained price levels above $1 per share--a requirement of the NYSE. , Acting director Edward J. DeMarco says in a statement, that the move is not a reflection of Fannie or Freddie’s current performance or future direction.

 After the companies are delisted--on or around July 8--their stock will trade in the over-the-counter market. Fannie is delisting from both the NYSE and the Chicago Stock Exchange.

 For investors--and borrowers--in the mortgage and housing sectors, the delisting adds to already grim news. For multifamily borrowers, it will not have an immediate impact--but does provide a glimpse into the role the GSEs will likely assume in the future.

 A delisting is merely a technical change as opposed to a major development in terms of capital raising, Fred Ruffy, senior trading analyst with WhatsTrading.com, tells GlobeSt investors will still be able to buy and sell shares.

Try explaining that to the markets though: shares of both were reeling Wednesday morning, as the news deals another blow to investor confidence in the two mortgage finance giants, Ruffy notes. "Prior to today's news, the stocks had been trading in a quiet range."

The news from the GSEs, coupled with a dismal reading from the NAHB Homebuilder Sentiment Index Monday--which fell to only 17 in June--and poor housing starts numbers released Wednesday morning lend to a growing pessimism that the mortgage and housing industries still aren’t improving, Ruffy says.

For multifamily borrowers, the delisting should have little impact, says LaFonte Nesbitt, a partner in Holland & Knight’s Real Estate Section, "so long as the Federal backstop of Fannie and Freddie continues." Despite mounting losses and the increasing costs of that backing, there has not been any really credible discussion about ending Federal support in the short term, he tells GlobeSt. 

Indeed, the GSEs’ multifamily portfolios continue to perform, exhibiting measurably lower default rates than securitized and bank multifamily pools, Sam Chandan, global chief economist and EVP of Real Capital Analytics, tells GlobeSt. "In part, this reflects the supportive risk-sharing arrangements of programs like Fannie Mae’s DUS."

 At bottom, though, the broader context for Fannie and Freddie, in the eyes of the public, stock market and Washington, are their single-family business losses. "These losses are expected to persist, necessitating an extended period of conservatorship or other form of support," Chandan says. "As long as the issue of the GSEs’ long-term structure and mandate remains in flux, the question of their ultimate role in the multifamily business remains unanswered."

 In fact, Chandan and Nesbitt say that there might be a silver lining to the delisting as the GSEs cope with market forces and growing calls in Congress to reorganize. A delisting, Chandan says, may help to ease some of these near-term pressures. "In as much as the delisting allows them to focus on satisfying the specific goals laid out for them by policymakers, it may offer them an additional degree of freedom to focus on those goals while working towards long-term viability under some new structure."

Nesbitt advances this point a little further: It is becoming increasingly obvious, he says, that in the longer term Fannie and Freddie will not be privately-owned publicly-traded companies in the way they were in their heyday. "Delisting is another step in the transition to their new yet-to-be-determined eventual form of ownership."