Fannie Mae & Freddie Mac Privatization & IPO under Trump? FNMA & FMCC Common Stock Investment Strategy (2025)
Potential privatization of Fannie Mae & Freddie Mac could present a unique set-up for investors
Years after the 2008 financial crisis placed Fannie Mae and Freddie Mac under government conservatorship, hopes for a long-awaited exit from this arrangement are on the rise.
Since Donald Trump’s return to the White House in January 2025, renewed speculation around GSE (government sponsored enterprise) reform has driven Fannie Mae (FNMA) and Freddie Mac (FMCC) stock share prices up several 100% from pre-election stagnation/lows.
This may have been fueled in part by Bill Ackman (CEO of Pershing Square Capital Management hedge fund) who posted a thesis that the Trump administration may make a huge push to privatize FNMA & FMCC which has potential to generate “multi-bagger” returns for investors.
Investors are watching the Federal Housing Finance Agency (FHFA) with heightened interest given that former Director Sandra Thompson is out and Bill Pulte (private equity exec in favor of market-based reform) has a pending nomination.
Meanwhile, Treasury Secretary Scott Bessent restored key provisions of the Preferred Stock Purchase Agreements (PSPAs), laying groundwork for a future exit but deferring major decisions until 2026 or later.
Against this backdrop of policy shifts, legal uncertainties, and a shifting macroeconomic environment, Ackman’s privatization thesis (potential IPOs for Fannie/Freddie) — remains something to consider for potentially high ROI under Trump’s presidency.
Fannie & Freddie in U.S. Gov Conservatorship
Fannie Mae (FNMA) and Freddie Mac (FMCC) were placed under government conservatorship in 2008 amid the financial crisis.
Originally intended to be a temporary move, the conservatorship has persisted for 17 years, largely due to political disagreements over how—and whether—to release them as private entities.
Post-Election: 2024–2025 Share Price Surge
The 2024 election of Donald Trump, followed by Bill Ackman’s December 2024 post on X about Fannie/Freddie privatization, sparked notable rallies in FNMA and FMCC (common stock).
My guess: A subset of investors front-ran the entire election (was worth a gamble given the coin-flip-or-better-odds of Trump winning and alignment with free markets and privatization)… so they benefitted massively post-election (huge spikes in both common stocks).
Then once Bill Ackman posted his thesis for potential “multi-bagger” returns in Fannie/Freddie on X (1.6M followers & perceived as a genius investor) many FOMO’d $ into this trade — thus spiking FNMA/FMCC stock prices even more.
At this point it is likely that with each domino that falls in favor of privatization/IPO (Thompson out → Pulte nomination → Bessent commentary, etc.) — FNMA/FMCC stock prices will keep trending upward.
However, if there are any major roadblocks that emerge or things stagnate — investors may end up with their money tied up in FNMA/FMCC for longer-than-hoped before privatization OR stocks may correct significantly if the IPO path becomes too difficult.
Fannie Mae (FNMA):
Pre-Election (Oct 2024): ~$1.20
Post-Election (Dec 2024): around $3
Currently (Feb 2025): ~$7
Freddie Mac (FMCC):
Pre-Election: ~$1.30
Late 2024: rose to $2.80
Currently (Feb 2025): ~$6.35
Investors clearly expect the new administration to push GSE reform. The question now is: How quickly and how comprehensively will the reform take place?
The ideal way to play this was probably something like: (1) take a gamble on FNMA & FMCC pre-election (get in positions early and hope Trump wins); (2) immediately throw money in FNMA/FMCC if you saw Ackman’s X post; (3) take out initial capital post-doubling/tripling/etc.; (4) free roll the rest or exit fully.
If you have faith that the Trump admin/Pulte/Bessent pull privatization of Fannie/Freddie off, you may want to just gradually build a position in common stock (or just get in big early).
Keep in mind that many big-shot investors are aware of this “trade” and potential timelines. It’s not really some major secret.
Trump’s Second Term & FHFA Changes
A.) Inauguration & Sandra Thompson’s Departure
January 19, 2025: Sandra Thompson resigned as FHFA Director, 1 day before Trump’s inauguration. This was partly voluntary, partly acknowledging Trump’s power to remove her. Fated.
Acting Director: Naa Awaa Tagoe, a career FHFA official, stepped in temporarily. This doesn’t mean much of anything.
B.) Bill Pulte Nom for FHFA Director
Contrary to earlier rumors that Jonathan McKernan might get the FHFA job, Bill Pulte was nominated by Trump.
Pulte has a private equity and philanthropic background, suggesting he’s open to market-based reforms.
Senate hearing dates not yet scheduled; Senate Banking Committee Chair Tim Scott (R-SC) indicated a willingness to discuss GSE reform with Pulte.
C.) Treasury Secretary Scott Bessent & PSPA Amendments
Scott Bessent: The new Treasury Secretary has signaled he wants to end conservatorship eventually but stated that the gov needs to implement tax reforms before it gets to privatization of FNMA/FMCC.
PSPA Amendments: In January 2025, Treasury and FHFA tweaked the Preferred Stock Purchase Agreements to restore Treasury’s right to consent to GSE releases. This lays groundwork but does not set a privatization timeline.
Bill Ackman’s Investment Thesis re: Fannie & Freddie Privatization: Core Logic
As mentioned earlier, Bill Ackman emerged as one of the most high-profile investors betting on a breakthrough in the long-standing conservatorship of Fannie Mae and Freddie Mac.
His thesis is basically as follows:
Government Has Been Fully Repaid: The GSEs’ net worth sweep has remitted significantly more to the U.S. Treasury than the original bailout amounts. If the GSEs can get “credit” for the over $300 billion in dividends paid over the years, this could effectively wipe out or drastically reduce the Treasury’s senior preferred stake, removing a major barrier to privatization.
Sustainable Earnings and Market Position: Fannie and Freddie generate robust, sustainable earnings, particularly during periods of market stress when private lenders retreat. Their dominant market position ensures that even in downturns, they gain market share—supporting their long-term profitability and stability.
Lowering Capital Requirements: Ackman envisions that a new FHFA director could renegotiate the regulatory framework to set a much lower capital threshold—around 2.5–3%—compared to the existing range of 4.5–8%. This lower “fortress capital” requirement is seen as sufficient for these entities given their strong credit profiles and senior role in the mortgage market, and it is the single most “negotiable” item in the push toward privatization.
IPO/Capital Raise in 2026–2027: Once the senior preferred stake is effectively retired (via credited dividends) and the GSEs are allowed to retain earnings, they would only need to raise a modest sum—estimated at $30–$50 billion—in an IPO or similar equity offering to fully exit conservatorship. In this scenario, the common stock would be revalued dramatically, potentially surging from low single digits to the $30+ range.
Huge Potential Upside for Common Stock: The combination of a reduced capital requirement and the elimination of the Treasury’s senior preferred claim sets the stage for significant upside. Ackman hypothesizes that if these reforms occur as planned, the common stock of Fannie and Freddie could become multi-baggers, offering investors a substantial return.
Odds of Privatization & Estimated Timeline (FNMA & FMCC)
Note: These scenario odds/timelines were estimated in February 2025. If any significant/new information is released, odds/timelines could rapidly shift — it is best to set-up “alerts” if you want to keep tabs on related news.
The timeline for a successful exit in the bull case remains a 2026 IPO target, while the base scenario would push the privatization process into 2027 or later, and the bear scenario could see reform stalled indefinitely.
A.) Bull Scenario (Aggressive Reforms in 2025–26)
Probability: ~10–15%
What It Looks Like:
Bill Pulte is confirmed quickly (in Q1/Q2 2025) and moves decisively to lower the capital requirements and rewrite the PSPAs (including crediting prior dividends to diminish Treasury’s senior preferred stake).
The administration treats GSE reform as a “big policy win” and, with minimal legal or political friction, sets a 2026 IPO target.
Share Price Impact: In this scenario, if investors see near-certain privatization by 2026, common shares could surge from their current levels (around $7 for FNMA and $6.35 for FMCC) well into the teens or even 20s.
B.) Base Scenario (Gradual Path to 2027+)
Probability: ~55–60%
What It Looks Like:
Pulte’s confirmation is more drawn out, and real PSPA changes and capital rule adjustments are only implemented after tax reform passes—likely in 2026.
This means the final exit (or full privatization) may not be achieved until 2027 or later.
Share Price Impact: Under this scenario, common shares are expected to appreciate gradually, with intermittent spikes on rumor-driven news, but the overall process is slower and more methodical.
C.) Bear Scenario (Delayed Beyond 2028 or Indefinitely)
Probability: ~25–30%
What It Looks Like:
The administration remains preoccupied with other priorities (such as tax reform and foreign policy), and legal challenges or adverse macroeconomic conditions (e.g., mortgage rates stuck at 6–7%, rising delinquencies) dampen the reform drive.
In this case, GSE reforms are stalled, and any moves toward privatization are pushed further out or occur only partially.
Share Price Impact: The stocks could either drift sideways or fall if investor sentiment cools, meaning the expected multi-bagger upside might not materialize.
Investment Strategy for FNMA & FMCC Privatization under Trump
Disclaimer: Nothing here is financial or investment advice.
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