Investing.com -- Shares in Fannie Mae (OTC:) and Freddie Mac (OTC:) both surged in premarket trading after Treasury Secretary Steven Mnuchin said the government is close to an agreement that would allow the two mortgage giants to retain their own earnings and end the government's decade-long practise of draining profits to pay for their bailout since the 2008 crisis.
"We expect in the near term we'll have an agreement where we will allow both Fannie Mae and Freddie Mac to retain their earnings," Mnuchin told Fox Business.
Profit retention seen as a preliminary step toward attracting fresh capital from external investors.
Mnuchin to address Senate tomorrow with proposals for legislation offering government guarantee conditional on a big injection of private capital.
Fannie Mae stock up 25%, Freddie Mac also indicated higher.