What are Fannie Mae and Freddie Mac?

Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are government-sponsored enterprises (GSEs) that buy mortgages from lenders, package them into mortgage-backed securities, and guarantee timely payment of principal and interest. Together they back roughly half of the $12 trillion US mortgage market, making homeownership possible for millions of Americans. Read the full guide.

Why were they put in conservatorship?

In September 2008, amid the housing crisis, the Federal Housing Finance Agency (FHFA) placed both companies into conservatorship after mounting losses on mortgage guarantees threatened their solvency. Treasury injected up to $200 billion each via Senior Preferred Stock Purchase Agreements, receiving a 10% annual dividend and warrants for 79.9% of common stock. See the full timeline.

What is the Net Worth Sweep / Third Amendment?

On August 17, 2012, Treasury and FHFA amended the Preferred Stock Purchase Agreements to sweep 100% of Fannie and Freddie's quarterly profits to the government, replacing the original 10% fixed dividend. This "Net Worth Sweep" meant the companies could never build capital, never repay their obligations, and never exit conservatorship. Shareholders view it as the largest government taking of private property in American history. Explore the Fanniegate story.

How much money has the government taken from them?

As of 2026, the US government has collected over $301 billion in dividend payments from Fannie and Freddie combined, against roughly $191 billion in original draws. That means taxpayers have been repaid in full plus over $110 billion in profit, yet Treasury still holds the senior preferred stock and the 79.9% warrant position.

Are Fannie and Freddie profitable now?

Yes, both companies have been consistently profitable since 2012. Fannie Mae and Freddie Mac each generate tens of billions of dollars in annual net income. They are among the most profitable financial institutions in the world, generating revenue from guarantee fees on mortgage-backed securities and returns on their retained mortgage portfolios.

What's the difference between Fannie Mae and Freddie Mac?

Both do essentially the same thing: buy mortgages, securitize them, and guarantee payment. Fannie Mae was created in 1938 and traditionally buys from large commercial banks. Freddie Mac was created in 1970 and originally focused on savings and loan institutions. Today their operations are nearly identical, though Fannie Mae is slightly larger by portfolio size.

Who oversees Fannie Mae and Freddie Mac?

The Federal Housing Finance Agency (FHFA) is the primary regulator and currently serves as conservator. The Treasury Department holds the senior preferred stock and warrants. Congress created FHFA in 2008 through the Housing and Economic Recovery Act (HERA), which gave the agency broad authority over the GSEs. Learn more about the regulatory structure.

FHFA stands for the Federal Housing Finance Agency. It is an independent federal agency that regulates Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. Since September 2008, FHFA has served as the conservator of both Fannie Mae and Freddie Mac, managing their operations with the stated goal of preserving and conserving their assets. The FHFA Director is appointed by the President and confirmed by the Senate.

Can you buy Fannie Mae stock?

Yes. Fannie Mae common stock trades over-the-counter under the ticker FNMA, and Freddie Mac common under FMCC. Both are available through most brokerages. Note that OTC stocks carry unique risks including lower liquidity and wider bid-ask spreads. The common shares face massive potential dilution from Treasury's 79.9% warrants. Read the beginner's guide.

What's the difference between common and preferred shares?

Common shares (FNMA, FMCC) represent ownership but sit at the bottom of the capital structure and face 79.9% dilution from Treasury's warrants. Preferred shares have a fixed par value (usually $25 or $50), trade at a discount to par, and sit above common stock in the capital structure. In any recapitalization, preferred shareholders are generally expected to receive value before common shareholders.

What are junior preferred shares?

Junior preferred shares are the preferred stock series issued by Fannie Mae and Freddie Mac before conservatorship. They are "junior" because they rank below Treasury's senior preferred stock but above common stock. There are over 30 series combined, most with $25 par value. Their dividends were suspended in 2008 and remain suspended during conservatorship. See Glen's positions.

How many preferred series are there?

Fannie Mae has 20+ preferred series (Series C through T, plus others), and Freddie Mac has 20+ series (Series A through Z, plus more). Popular tickers include FNMAS (Fannie Mae Series S, $25 par, 8.25% coupon), FMCKJ (Freddie Mac Series Z, $25 par, 5.81% coupon), and FNMAT (Fannie Mae Series T, $25 par, 8.25% coupon). Each series has slightly different terms, coupon rates, and liquidity profiles.

Par value is the face value of a preferred share, typically $25 or $50. It represents the liquidation preference and the amount upon which dividend payments are calculated. For example, an 8.25% coupon on a $25 par share means $2.0625 per year in dividends when they are being paid. The investment thesis for GSE preferreds centers on shares trading well below par today potentially returning toward par value upon recapitalization.

What would happen to preferred shares in privatization?

The most bullish outcome is that preferred shares get restored to full par value ($25 or $50) and resume dividend payments. Other scenarios include conversion to common stock at favorable terms, a partial par recovery, or exchange into new securities. The exact treatment depends on negotiations between FHFA, Treasury, and potentially Congress. Read why Glen holds.

What could wipe out preferred share value?

The main risks include: a Congressional restructuring that eliminates private shareholders, a receivership that winds down the companies, conversion of preferred shares at highly dilutive terms, indefinite conservatorship with no path to release, or a new administration reversing privatization progress. A complete wipe-out would require an act of Congress or a dramatic departure from current policy direction.

Is investing in GSEs risky?

Extremely. GSE investing is a political, legal, and structural bet with binary-like outcomes. The shares are illiquid OTC securities whose value depends almost entirely on government policy decisions. This is not a normal stock investment. You can make multiples of your money or lose everything. Never invest more than you can afford to lose. Understand the risks.

Will Fannie and Freddie be privatized?

As of 2026, the momentum toward privatization is stronger than at any point since conservatorship began. Both FHFA and Treasury have signaled intent to recapitalize and release the GSEs. The companies have been building capital since the net worth sweep was modified. The question is no longer "if" but "how" and "when." Track the latest catalysts.

What has Treasury Secretary Bessent said about GSEs?

Treasury Secretary Scott Bessent has publicly confirmed that the administration intends to end conservatorship and recapitalize Fannie Mae and Freddie Mac. He has described the process as a priority and indicated it could be accomplished administratively without Congressional legislation. His statements have been the strongest pro-privatization signals from a Treasury Secretary since the GSEs entered conservatorship.

What is the recap and release plan?

"Recap and release" refers to the plan to recapitalize Fannie Mae and Freddie Mac with sufficient private capital and then release them from FHFA conservatorship. This likely involves retaining earnings, potentially raising new equity through a public offering, settling Treasury's senior preferred position and warrants, and establishing appropriate capital requirements under new regulatory frameworks. Read the detailed guide.

What legal cases are relevant?

The most significant cases include Collins v. Yellen (Supreme Court, 2021), which addressed FHFA's constitutional structure; the Lamberth cases in the Court of Federal Claims seeking just compensation under the Fifth Amendment; and various APA challenges in federal district courts. Discovery in these cases revealed internal government documents suggesting the Net Worth Sweep was designed to prevent the GSEs from ever paying back shareholders. Read the full Fanniegate story.

What did Collins v. Yellen establish?

In Collins v. Yellen (2021), the Supreme Court ruled that FHFA's structure was unconstitutional because the single director could only be removed for cause, violating separation of powers principles. However, the Court declined to invalidate the Net Worth Sweep on statutory grounds under HERA's broad authority. The case was remanded for further proceedings on whether shareholders could obtain relief under a constitutional theory.

What is the FSOC activities-based approach?

The Financial Stability Oversight Council (FSOC) has shifted from designating individual companies as "systemically important financial institutions" (SIFIs) toward an activities-based approach that regulates risky activities across the financial system. This is bullish for GSE reform because it reduces the likelihood that Fannie and Freddie would face punitive SIFI designation upon exit from conservatorship. Read the analysis.

When could privatization happen?

The most optimistic timelines suggest privatization could happen in 2026-2027, with administrative action from FHFA and Treasury not requiring Congressional approval. More conservative estimates put it at 2027-2028, accounting for the complexity of the capital raise, regulatory approvals, and potential legal challenges. The key variable is political will: this administration has it, but the window may close if leadership changes.

What are the main obstacles to privatization?

The largest obstacles include: determining adequate capital levels (FHFA's 2020 rule required roughly $280 billion combined), negotiating Treasury's senior preferred and warrant positions, executing what would be the largest equity offering in history, maintaining affordable mortgage rates during transition, avoiding disruption to the $12 trillion mortgage market, and potential legal challenges from parties who oppose the terms of recapitalization.

Who is Glen Bradford?

Glen Bradford is a Purdue-educated engineer turned investor, Seeking Alpha contributor, and Salesforce developer based in Miami Beach. He has been publicly advocating for GSE shareholder rights since 2013 and has written extensively about the conservatorship, the Net Worth Sweep, and the investment thesis for Fannie Mae and Freddie Mac preferred shares. See Glen's timeline.

How long has Glen been invested in GSEs?

Glen has held GSE preferred shares since 2013, making him one of the longest-tenured retail investors in the Fannie and Freddie saga. That is over 12 years of conviction through multiple administrations, court rulings, and market cycles. Read why he holds.

What positions does Glen hold?

Glen holds various Fannie Mae and Freddie Mac junior preferred shares. He is fully transparent about his positions and publishes them publicly. His thesis centers on the preferred shares returning toward par value upon recapitalization, with some series trading at significant discounts. View current positions.

Fanniegate is Glen's term for the government's seizure of Fannie Mae and Freddie Mac shareholder value through the Net Worth Sweep. He has written eight books documenting the story, the legal battles, and the political dynamics behind the conservatorship. The name draws a parallel to Watergate, suggesting a cover-up of the government's true motivations for the sweep. Read the Fanniegate story.

How many articles has Glen written?

Glen has written over 2,700 articles on Seeking Alpha and his personal blog covering GSE investing, market analysis, and the Fanniegate saga. He has also authored eight books on the topic. His body of work represents one of the most comprehensive independent analyses of the Fannie Mae and Freddie Mac situation. Browse Glen's books.

Is this financial advice?

No. Nothing on this website constitutes financial advice. Glen Bradford is not a registered investment advisor, broker-dealer, or financial planner. All content is for educational and entertainment purposes only. GSE investing carries extreme risk, including total loss of principal. Always do your own research and consult a qualified financial professional before making investment decisions.

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This FAQ is for educational and informational purposes only. Glen Bradford is not a registered investment advisor. Investing in GSE securities carries extreme risk, including total loss of principal. Always consult a qualified financial professional before making investment decisions.

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