Fannie Mae Shares Gain on Government Policy Shift

Shares of the government-sponsored enterprise (GSE) Fannie Mae have posted moderate gains recently. This movement follows a significant policy directive from the White House aimed directly at the U.S. mortgage market. The administration is now strategically leveraging the federally backed entity to help alleviate high financing costs within the housing sector.

In a key development, U.S. authorities have instructed Fannie Mae and its sibling entity Freddie Mac to deploy more of their retained earnings into the secondary market for mortgage-backed securities (MBS). Specifically, the two GSEs are authorized to purchase up to $200 billion worth of these instruments.

Treasury Secretary Scott Bessent cited the evolving role of the Federal Reserve as the rationale. While the Fed concluded its balance-sheet reduction program, known as Quantitative Tightening, on December 1, 2025, and is now managing its portfolio neutrally, it continues to allow its MBS holdings to run off. This runoff amounts to approximately $15 billion per month, with the proceeds being reinvested into Treasury securities rather than new mortgage paper.

The new mandate for Fannie Mae is designed to "roughly offset" this supply in the marketplace. The objectives are threefold: to absorb the excess supply, to narrow the spread between mortgage rates and Treasury yields, and to achieve this without expanding federal debt.

Mortgage Rates Dip Below Key Threshold

The reaction in the U.S. mortgage market was swift. Following the announcement, the average rate for a 30-year fixed mortgage fell to 5.99%. This marks the first time in nearly three years that the rate has dropped below the psychologically significant 6% barrier.

For shareholders, this sends a dual signal. First, it reinforces Fannie Mae's critical role as a tool of contemporary economic policy. Second, the company is effectively acting as a buyer of last resort for its own securities. While this stabilizes asset prices, it also ties the firm's capital more closely to political objectives.

Should investors sell immediately? Or is it worth buying Fannie Mae?

Privatization Timeline Adds a Layer of Complexity

Running parallel to the new purchasing program, the long-debated issue of privatization is regaining prominence. Bill Pulte, Director of the Federal Housing Finance Agency (FHFA), recently indicated that a decision regarding a potential release from government conservatorship and an initial public offering (IPO) could come "within the next one to two months."

This timeline is crucial for valuation. Investors, including Bill Ackman, have long argued that a full return to private ownership could justify significantly higher valuation multiples than the current share price reflects. Pulte's comments suggest that, despite its new role as a major MBS buyer, the path toward independence remains conceptually open.

However, a conflict emerges regarding capital allocation: every dollar directed toward the $200 billion purchase program is unavailable for building the equity base necessary for an independent institution.

Fundamental and Technical Considerations

From a balance sheet perspective, the program involves Fannie Mae exchanging liquidity for interest-bearing mortgage assets. This should, in principle, boost net interest income in upcoming quarters. Concurrently, the stated political goal is to lower mortgage rates—which may result in thinner margins on these newly acquired securities compared to the existing portfolio.

Technically, the stock appears robust. The advance to approximately $11.01 was accompanied by elevated trading volume, hinting at increased institutional interest. The price is currently holding above noted support around $10.74. Market observers suggest that if privatization expectations accelerate in the coming weeks, tests of resistance near 52-week highs could be plausible. Conversely, if investors interpret the $200 billion directive as a signal of a permanent "utility role" within the government framework, the privatization premium currently priced into the stock could face pressure.

Key Data Points

• Current Share Price: Approximately $11.01, with technical support near $10.74
• New Mandate: Authorization to purchase up to $200 billion in MBS
• Federal Reserve Context: Overall QT ended December 1, 2025; MBS portfolio continues shrinking by about $15 billion monthly
• Mortgage Rates: 30-year fixed rate at 5.99% post-announcement
• IPO/Privatization Schedule: A fundamental decision from the White House expected within roughly 60 days

A Pivotal Period Ahead

The next eight weeks are viewed as a critical phase. The market awaits clarity on whether Fannie Mae will primarily serve as a political instrument to ease housing market pressures or transition into an independent, publicly listed financial company. The current price action reflects a cautiously optimistic bias toward privatization, buoyed in the short term by the new liquidity program.