Fannie, Freddie downgraded to Sell with $1 targets at B. Riley FBR

B. Riley FBR analyst Randy Binner this morning downgraded both Fannie Mae (FNMA) and Freddie Mac (FMCC) to Sell from Neutral with price targets of $1, down from $2. The CARES Act has created significant consequences for the mortgage space, Binner told investors in a research note. For mortgage insurers, elevated delinquency expectations resulting from the 12-month mortgage holiday embedded in the CARES Act have raised questions about capital adequacy under the Private Mortgage Insurer Eligibility Requirements, adds the analyst. While a liquidity solution for mortgage servicers is likely, says Binner, the CARES Act highlights the risk profile for the broad guarantees written by Fannie and Freddie. Pressure here "could significantly impact earnings and reduce chances of recap and release," according to Binner. On the flip side, the analyst keeps Buy ratings on both MGIC Investment (MTG) and NMI Holdings (NMIH). The stocks have already started to discount a capital raise, says Binner.