Fannie and Freddie Shares Tank as Doubt Swirls About Trump Plans

Shares of Fannie Mae and Freddie Mac have reached their lowest levels in over a year as uncertainty grows over the Trump administration's plans to reform the mortgage finance sector. The shares have declined about 70% since mid-September, when hopes for a 2025 public offering peaked. Analysts suggest delayed timelines for reform have dampened investor optimism.

The drop has extended to preferred equity, which is mostly held by institutional investors. Freddie Mac's perpetual shares have fallen significantly, reflecting a broader loss of confidence in the administration's roadmap for the conservatorship of Fannie Mae and Freddie Mac.

Wedbush analyst Henry Coffey has revised his price targets for both Fannie Mae and Freddie Mac downward, citing the political back-burner status of the public offering. He reduced Fannie Mae's target to $8 from $13 and Freddie Mac's to $12 from $13.35, but maintains an Outperform rating.

Why Did This Happen?

Investor enthusiasm for Fannie Mae and Freddie Mac shares waned after the administration failed to meet expectations for a public offering in 2025. The shares had briefly reached a 2008 high in September, but the subsequent silence from the administration led to a steep sell-off.

Coffey notes the administration is unlikely to address Fannie Mae and Freddie Mac reform until after the midterms. He outlined scenarios where shares could lose all value or take decades to yield returns through dividends.

How Did Markets React?

Fannie Mae and Freddie Mac shares fell 3.2% and 2.6% respectively on March 18, following the revised price targets. Both have lost more than 60% from a September peak.

The administration's recent executive orders did not address the conservatorship or IPO plans. President Trump has remained focused on other priorities, and no new initiatives have been announced for Fannie Mae and Freddie Mac.

What Are Analysts Watching Next?

Coffey's analysis highlights three potential scenarios for the administration: doing nothing, building capital and paying dividends in 7–10 years, or converting preferred shares to common stock. The first scenario implies near-zero value for shares, while the others depend on long-term policy decisions.

Despite the recent downturn, Coffey believes Fannie Mae and Freddie Mac shares still offer value. The market's reaction hinges on future policy clarity and potential market adjustments.

Alternative Financing Models Emerge

Lone Star Funds has announced the final closing of its Residential Mortgage Fund IV, a $1 billion investment vehicle aimed at supporting non-agency mortgage loans. The fund targets U.S. borrowers who lack access to traditional government-backed mortgages.

Lone Star's strategy focuses on self-employed individuals and small business owners with strong credit profiles. The fund has already committed 33% of its capital and plans to invest over $10 billion in mortgage loans.

The firm has leveraged its securitization platform, COLT, to fund its investments. This includes issuing the first post-2008 non-agency loan securitizations with AAA ratings. The platform has supported over $20 billion in mortgage loans since its inception.

Conclusion

While Fannie Mae and Freddie Mac continue to face uncertainty under the Trump administration, alternative financing models are emerging to fill gaps in the market. Investors are advised to monitor policy developments and consider the broader landscape of mortgage financing options as they evaluate their positions.