Actually, I believe Freddie crashed down today because they reported a $3+ dollar loss for the quarter. Freddie is trading for less than $30 currently. A few more quarters like that and they will be insolvent. Fannie probably went down because of the Freddie earnings report.

I would love to see both of these POSs fail and then have the government not bail them out. Then we would really see a decline in home prices. With no quasi-governmental entity to guarantee mortgages, we’d start to see home prices gravitate to their true market value. That would be a great day.

Also, I disagree that the decline is due to a fear of future bad loans being stuffed into Fannie and Freddie. Based on Freddie’s huge loss, it looks like the GSEs already have tons of bad loans on their books. I recently got pre-approved for a ~ $300K mortgage from ELoan. Since it could be sold to Fannie, I wouldn’t have had to put any money down — all my closing costs could be folded into the loan. I think Fannie and Freddie are backing the same crappy mortgage loans as every one else — they just have a whole bunch of smaller bad loans instead of a bunch of jumbo bad loans.

BTW, is it OK if this news about Freddie and Fannie makes me giddy? Because it does.