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Films of the 19th Century

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Business Plan and Strategy for Fannie Mae:
Foreclosure Profit Generation

Firmus Consulting

Tennessee Technological University
MBA Program
BMGT 6950 Strategic Management
October 7, 2012

Recommendations
Issues
Facts and Analysis
Summary

Recommendations Fannie Mae is confronted with two obligations – the first to taxpayers and the second to shareholders. “Goal A” is for FNMA to reduce its portfolio by 15% each year until the end of their government obligation (2018). “Goal B” is to pay back the treasury taxpayer capital to once again retain profit. Once profit is realized, public trading will likely increase. Implementing a rental program on foreclosed homes is a logical and profitable way to both bolster economic growth and incur funds for loan repayment. The homes still have caretakers, so value will not drop further as with most foreclosed buildings. Those homes which are not yet foreclosed upon, but are rapidly approaching, should be considered for a refinanced ARM or low-payment fixed mortgage to prevent foreclosure and ensure sales on the secondary market. The securities required for the 15% reduction should be pooled into CDOs or CMOs where the low-class securities are once again made more attractive through pairing with similarly aged Class-A bonds. If there is a tranche for risky/reliable mortgages which pay an overall higher coupon for the investor, it makes the purchase more worthwhile while the revenue from rentals helps to offset this.

Facts and Background: The Federal National Mortgage Association (Fannie Mae) was found in 1938 during great depression under President Franklin Roosevelt. The goal of the company was to help the poor people to buy house. Fannie Mae remained part of the federal budget until 1968, when President Lyndon Johnson was facing a big deficit due to the Vietnam War. In

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