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Hedge funds bet on Fannie Mae and Freddie Mac

Stocks have been up more than 170% this year amidst privatization rumors

Recent statements by administration officials have led some investors to believe that the government will take Fannie Mae and Freddie Mac out of conservatorship. This possibility has been a boon for the stock, which is up more than 170% this year, the WSJ reported.

The basics: Fannie and Freddie buy mortgages from lenders and package them for issuance as securities. The government effectively nationalized them in 2008 in a bid to stabilize the housing market as mortgage defaults mounted.

Be Smart: The Trump administration can technically release the companies from government control without the consent of Congress. However, the issue is politically fraught as a change could hurt the price and availability of mortgages for millions of Americans.

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