Fannie Mae and Freddie Mac shares slide as privatization hopes fade

what happened

Barron’s reports that Mizuho analysts downgraded Fannie Mae and Freddie Mac and cut their price targets by at least half. The target for Fannie Mae fell from $10 to $5, while Freddie Mac’s was reduced from $9 to $4. Analysts Dan Dolev, Eyal Ben-Eliyahu, and Alexander Jenkins said rising mortgage rates and high housing costs make privatization more difficult politically.

Mizuho also pointed to Federal Housing Finance Agency head Bill Pulte’s stance on the companies buying more mortgages to keep on their balance sheets, along with recent changes to the credit scoring system. The analysts expect these issues to slow capital accumulation and complicate the timeline for an exit from government control. They said they would remain cautious until rates fall and/or the other two matters are resolved.

Fannie Mae and Freddie Mac common shares dropped 12.7% and 13%, respectively, shortly after the market opened. Fannie Mae was heading toward its lowest close since early January 2025, while Freddie Mac was set for its lowest close since late December 2024. Dow Jones Market Data showed the stocks down 67% and 68%, respectively, this year. Mizuho cut its estimated probability of a fast conservatorship exit by 2028 from 30% to 18% for FNMA and from 20% to 9% for FMCC.

why it matters

The Federal Housing Finance Agency has supervised both companies since they entered conservatorship in 2008 after the 2008-09 financial crisis. Their shares are valued largely on the prospect of ending the 17-year government conservatorships, under which common equity remains structurally subordinate to Treasury senior preferred stock; the shares trade on OTC Markets.

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