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Fannie Mae’s Wild Ride: A Billionaire’s Jackpot or a Homebuyer’s Nightmare?

Author

Jason Farris
January 13, 2025

Let’s talk about one of the most unexpected winners since the election—not Bitcoin, not some obscure crypto bet, but good old Fannie Mae. Yep, that “stodgy 87-year-old” company (as Bloomberg calls it) guarantees 70% of US home mortgages alongside its partner-in-crime, Freddie Mac.

These mortgage giants have been stuck in government conservatorship since the Great Recession bailout, with Uncle Sam pocketing all their profits. But billionaire hedge fund guru Bill Ackman thinks that’s about to change. He’s betting big that Trump will privatize them next year—a move that could make Fannie Mae stockholders filthy rich.

The Billion-Dollar Bet 💰🏠

Right now, the government owns 80% of Fannie and Freddie, so shareholders don’t see a dime in dividends. But Ackman’s calling it: if privatized, Fannie Mae’s stock could skyrocket from $5 to $34. 🚀 That’s life-changing money for investors.

However, privatization wouldn’t just be a win for hedge funds. It’d shake up the mortgage market—and not necessarily in a good way for everyday Americans. Without government backing, mortgage rates could climb 📈, slapping an extra $2,800 a year on the average home loan. 💸

How We Got Here 📜

Fannie Mae and Freddie Mac were created to make mortgages affordable for Americans. Fannie’s roots go back to the Great Depression 🌎, while Freddie joined the game in 1970. Their business? Buying mortgages from banks, bundling them into securities, and guaranteeing those investments.

When the 2008 mortgage crisis hit, the government bailed them out 💼 and took control, funneling all profits to the Treasury. Since then, Fannie and Freddie have racked up $147 billion in equity, with the government already $25 billion ahead on its bailout investment. Ackman thinks a privatization IPO could pull in another $300 billion for the Treasury, making it the biggest IPO in US history. 📊

The Catch 🌀

There’s a twist. Ackman’s vision depends on one interpretation of the rules. And the government? It might not want to hand over control of two companies that keep the mortgage market stable and profitable. 💡 Plus, with mortgage rates already around 7% 📉, Trump might not even make this a priority.

What’s Next? 🔮

If privatization happens, it’ll be a jackpot for investors like Ackman. 💎 But for homebuyers, it could mean something entirely different. 🏡 What are your thoughts? 💬 Email me at [email protected] ✉️