Michael Burry warns Fannie Mae and Freddie Mac shares could be worthless

what happened

Benzinga reports that investor Michael Burry warned technical patterns in Federal National Mortgage Association and Federal Home Loan Mortgage Corp. shares point toward a possible loss of value. In a post on X, he disclosed recent moves in both over-the-counter mortgage equities. Burry said the stocks had retraced essentially all of their gains since Donald Trump’s election and formed a large head-and-shoulders pattern, signaling additional technical weakness.

He said the earlier speculative momentum, which he described as “meme juice,” was being removed from the shares. In Burry’s view, the chart points to “worthless stock,” while broader market attention remains concentrated on artificial-intelligence trades.

Burry also highlighted the government’s senior preferred stock liquidation preference, which continues to increase each quarter. Citing market action and sell-side research from KBW, he said Wall Street’s base case is moving toward the U.S. Treasury converting the senior preferred stock into common equity. Existing common holders would face severe dilution under that outcome, with Burry writing that they could be diluted by at least 90%. FNMA fell 31.64% over the past month, 62.35% year-to-date and 66.75% over the year; FMCC declined 29.90%, 63.71% and 68.84%, respectively.

why it matters

The market focus is on the companies’ capital structure and the government’s role: ending conservatorship or reducing the senior preferred liquidation preference could affect the value available to common shareholders. Burry said policy action is needed to unlock that value.

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