Shares of Fannie Mae and Freddie Mac continued their sharp decline on Friday, deepening a multi-day losing streak. Investor confidence is crumbling due to growing concerns about President Donald Trump's recent policy actions. These moves threaten plans to free the mortgage-finance giants from government control.
Stocks Hit Hard in Trading
Fannie and Freddie common stock both dropped approximately 10% during Friday's trading session. This plunge pushed them to their lowest intraday levels since late November. Fannie's stock fell for a fifth consecutive day, while Freddie extended its losing streak to seven days.
Both companies have now tumbled more than 40% from their peaks reached in September. Despite this significant drop, the stocks still remain up over 60% compared to their levels from one year ago.
IPO Optimism Fades Quickly
Earlier optimism about potential upcoming initial public offerings had fueled notable gains for both companies throughout 2025. Fannie Mae and Freddie Mac have remained under Washington's control since the financial crisis. Investor enthusiasm peaked in August after reports surfaced that the administration was considering an IPO.
That offering could have valued the enterprises at around $500 billion or more. The plan involved selling 5% to 15% of their stock to raise approximately $30 billion.
Recent Developments Dampen Hope
Recent proposals have significantly dampened that earlier optimism. President Trump's directive requiring Fannie and Freddie to purchase mortgage bonds has created uncertainty. Additional remarks casting doubt on an offering happening anytime soon have further eroded investor confidence.
Matthew Aks, a strategist at Evercore ISI, notes that the "IPO dead" narrative is gaining considerable attention. However, he emphasizes this perspective doesn't tell the complete story. "I have heard some anecdotes of people who have been in this trade for a year and are up a good bit already just deciding now is the time to take profits and get out," Aks explained.
The strategist still sees a potential path forward for investors. He described it as "not quite full IPO but still a way where there is more upside."
Trump's Housing Proposals Under Scrutiny
In recent weeks, investors have been carefully assessing a series of housing-linked proposals from the Trump administration. One key directive orders Fannie and Freddie to purchase $200 billion in mortgage bonds. President Trump presented this move as part of a broader effort to reduce housing costs.
Market participants are also speculating about what the president might announce regarding housing policy next week. He is scheduled to speak at the World Economic Forum in Davos, Switzerland.
Analysts Express Balance Sheet Concerns
JPMorgan global economist Joseph Lupton addressed the mortgage-bond directive in a recent note. "Trump's mortgage-bond directive adds risk to the balance sheet in the event of future losses," Lupton wrote. He further explained, "To the extent the administration has talked in the past about letting the GSEs go private, levering them up in this way could delay their release from government control."
Lupton used the term GSEs, referring to Fannie and Freddie as government-sponsored enterprises.
Regulatory Comments Add to the Mix
On Thursday, Federal Housing Finance Agency Director Bill Pulte made notable comments. He praised President Trump's decision not to sell the mortgage-finance companies during his first term. "Thanks to President Trump's decision to not sell these companies for $100 billion in his first term, Fannie and Freddie are getting stronger every day," Pulte wrote in a social media post.
Earlier this month, Pulte indicated that Trump would decide on the next steps for the Fannie and Freddie IPOs within the next month or two. This timeline adds another layer of uncertainty for market participants watching these developments closely.
The combined effect of policy uncertainty, IPO doubts, and balance sheet concerns continues to pressure share prices. Investors remain cautious as they await clearer signals about the future direction of these government-sponsored enterprises.
