Bill Ackman Predicts 900% Gains for Fannie Mae and Freddie Mac

Billionaire investor Bill Ackman has projected that shares of Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) could surge by approximately 900% under a potential second Trump administration. Ackman, a vocal supporter of former President Donald Trump, outlined his bullish thesis in a recent post on X, citing deregulation and corporate tax cuts as key drivers for the mortgage giants’ resurgence.

Ackman’s hedge fund, Pershing Square Holdings, has held significant stakes in Fannie Mae and Freddie Mac since 2013. The two government-sponsored enterprises (GSEs) were placed under federal conservatorship in 2008 during the financial crisis after accumulating massive losses from subprime mortgages. Under the conservatorship, Fannie and Freddie have been required to send nearly all profits to the U.S. Treasury under a net sweep agreement.

However, Ackman believes the GSEs could exit conservatorship by 2026, following a recapitalization plan that would allow them to retain earnings and meet new capital requirements. He estimates that Fannie Mae and Freddie Mac could reach a valuation of $34 per share, representing an 888% and 909% increase, respectively, from their current prices as of January 2, 2025.

Key to Ackman’s thesis is the assumption that the Treasury Department would credit past distributions under the net sweep agreement toward retiring senior preferred stock held by the government. Additionally, he suggests that the GSEs’ capital requirements could be set at 2.5% of outstanding mortgage guarantees, a level he deems sufficient to cover potential losses.

While Ackman’s optimism has sparked a rally in Fannie and Freddie shares, analysts caution that significant risks remain. The Congressional Budget Office (CBO) previously suggested a 3% capital requirement, and it is unclear whether the Treasury would agree to apply past distributions to senior preferred stock. Investors are also advised to consider junior preferred shares, which offer less upside but higher priority in the capital structure.

Despite the uncertainties, Ackman’s projections highlight the potential for significant gains if the GSEs are released from conservatorship. The outcome will largely depend on policy decisions by the incoming administration and regulatory bodies.