Fannie Mae and Freddie Mac may see a shift in the operations in the future. A group of investors has reportedly been anxiously awaiting the day Fannie and Freddie return to the public markets. None has been more vocal than billionaire investor Bill Ackman, whose hedge fund, Pershing Square Capital, is one of the largest holders of common shares in Fannie and Freddie.
“We have been leading the charge on behalf of all (Fannie and Freddie) shareholders to help them to exit from conservatorship,” Ackman posted on social media on Tuesday.
Fannie Mae and Freddie Mac have been the leading lenders for homeowners in the United States for years, but now, under President Donald Trump, it looks like there might be a very good chance that the two companies could be made available to billion-dollar hedge funds to carve out the way they want.
READ: Donald Trump to privatize mortgage firms Fannie Mae and Freddie Mac (January 3, 2025)
Could government conservatorship over the country’s most popular lenders be in the cards?
Hedge fund investors sure hope so. “(Fannie and Freddie) shareholders don’t have their hands out. The opposite is the case,” Ackman wrote last week on social media. “(Fannie and Freddie) shareholders are simply seeking credit for payments that have already been made to the government so that a release from conservatorship can occur.”
The hedge fund investors wait anxiously as they don’t know what Trump and his government is likely to do with their stakes in Fannie and Freddie, which apparently takes precedence over outside investors. Investor shares in both companies will only be worth something if Trump so chooses.
Fannie and Freddie owe the government $190 billion, which needs to be paid back, before the companies can leave their government overseers. However, hedge funds are now worried if the government will ever release conservatorship of Freddie and Fannie.
If that happens, chances are high that investors who have substantial stakes in the two companies may see significant losses in their investments.
“At the moment, on an economic basis, the private shareholders’ equity is about negative $200 billion, because that is what Fannie and Freddie owe the government,” said Bose George, a managing director at Keefe, Bruyette & Woods, a boutique investment banking company. “Owning the shares is speculative because you’re making an assumption that the government is going to forgive this debt.”
Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are government-sponsored enterprises (GSEs) created to support the U.S. housing market. Their primary role is to provide liquidity, stability, and affordability to the mortgage market by buying mortgages from lenders, pooling them, and selling them as mortgage-backed securities (MBS) to investors. This process allows lenders to free up capital, encouraging more home loans and increasing access to homeownership. Both entities were established to make mortgage financing more available and affordable, especially for low- to moderate-income borrowers. Although they are privately owned, Fannie Mae and Freddie Mac operate under federal charters and were placed under government conservatorship in 2008 during the financial crisis due to massive mortgage defaults. Today, they remain crucial in supporting the U.S. housing finance system, ensuring a steady flow of funds to mortgage lenders and helping maintain stability in the housing market.