Trump's "New Deal" Priority Shift: Fannie Mae and Freddie Mac IPO Dreams Shattered as Stock Prices Plummet 70%!

Fannie Mae and Freddie Mac stock prices have fallen about 70% over the past six months, reaching their lowest levels in more than a year. Previously, investors were skeptical about the Trump administration’s efforts to sell more shares of these two mortgage giants to the public.

Since mid-September, their stock prices have been in a sharp decline. Not long ago, there was optimism that these institutions might go public in 2025, but that expectation has not materialized. Preferred shares, mainly held by long-term institutional investors, have also declined. Freddie Mac’s perpetual preferred stock has fallen about 23% in the past month, nearing the trading levels seen a few days after Trump won the election.

The Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, did not immediately respond to requests for comment.

BTIG analyst Erik Hagen said that these companies are facing a “total collapse” as transparency around their plans continues to diminish.

Additionally, their stock prices tend to fall when the 10-year Treasury yield, a benchmark for borrowing costs, rises. As seen on Wednesday, after the Federal Reserve kept interest rates unchanged, Fed Chair Jerome Powell spoke, and yields climbed.

Hagen said via email, “These stocks are actually becoming more negatively correlated with interest rates, mainly because the market interprets that Trump might exert greater control over the companies to offset the impact of high rates.”

Since the global financial crisis, Fannie Mae and Freddie Mac have been under Washington’s control. In August last year, reports indicated the White House was planning an IPO, with valuations potentially reaching around $500 billion or more, and involving the sale of 5% to 15% of shares to raise about $30 billion. Following this news, their stock prices surged temporarily.

However, few details have emerged since, and government attention appears to have shifted to other priorities, such as the Iran conflict. Rising mortgage rates could also make housing affordability a top concern, leading officials to be cautious about pushing forward with stock issuance plans, as market skepticism about government backing could push mortgage rates higher.

Evercore ISI analyst Matthew Ax said, “Without a decision on the next steps for government-sponsored enterprises (GSEs), the short-term outlook remains uncertain. But there’s still plenty of time during this administration for GSEs to become a priority again.”

Last week, Wedbush analyst Henry Coffey said he believes the stock issuance for these mortgage agencies will not start until after the November U.S. midterm elections. Since Trump is “obviously focused on other matters,” Coffey expects that any government statements about Fannie Mae and Freddie Mac will focus on “reducing mortgage costs for homeowners.” He also lowered the target prices for their common stocks.

Economist and investor Peter Schiff further questioned this week.

In a post on X, he wrote, “True privatization is impossible. Any move to privatize profits while taxpayers bear the losses will only raise mortgage rates and lower home prices.”

His conclusion: “Trump won’t stick to it.”

Earlier this week, Oksenholt Capital Management announced it had “taken profits on some of its holdings of Fannie Mae common stock,” but added, “We still remain optimistic about these two companies and their subordinate preferred shares.”

The firm also stated on Monday that Oksenholt and its affiliated investment vehicles are among the largest holders of Freddie Mac common stock.

It is still unclear what specifically triggered the more than 20% drop in common stock this week. Ax from Evercore suggested a potential catalyst could be the lack of detailed plans for a public share sale in the strategic report released by FHFA. If so, investors may have overreacted, as this document is not typically used for major policy announcements.

Last week, Trump signed an executive order aimed at increasing housing affordability, part of efforts to ease living costs amid rising oil prices and market turbulence caused by the Iran conflict. These directives did not mention an IPO or other plans to release Fannie Mae and Freddie Mac shares.