GSE Investing Guide

Fannie Mae Preferred Shares Explained

FNMAS, FMCKJ, FMCCS — In Plain English

This page explains what Fannie Mae and Freddie Mac preferred shares are, how they work, why they trade where they do, and what could happen next. Written by someone who has held them since 2016 and published over 300 articles about them.

What Are GSE Preferred Shares?

Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are government-sponsored enterprises (GSEs) that together guarantee roughly half of all US mortgages. Before the 2008 financial crisis, they were publicly traded companies with private shareholders.

Both companies issued preferred stock — a type of security that sits between debt and common stock in the capital structure. Preferred shares have a stated par value ($25 or $50 per share), a contractual dividend rate, and seniority over common stock for dividends and liquidation proceeds.

There are 36+ series of GSE preferred shares across both companies. They trade on the OTC (over-the-counter) market under tickers like FNMAS, FMCKJ, FMCCS, FMCCJ, and many others. All dividends have been suspended since 2008.

Key Preferred Tickers

FNMASFannie Mae

Fannie Mae Series S

Par: $25 | Coupon: 8.25% | Fixed-rate, Non-cumulative

FMCKJFreddie Mac

Freddie Mac Series Z

Par: $50 | Coupon: 5.81% | Fixed-rate, Non-cumulative

FMCCSFreddie Mac

Freddie Mac Series S

Par: $25 | Coupon: Variable | Variable-rate, Non-cumulative

FMCCJFreddie Mac

Freddie Mac Series J

Par: $25 | Coupon: 5.0% | Fixed-rate, Non-cumulative

FNMAJFannie Mae

Fannie Mae Series J

Par: $50 | Coupon: Variable | Variable-rate, Non-cumulative

These are some of the most actively traded series. There are 36+ series total across both Fannie Mae and Freddie Mac. See the full list of 26 series I own.

The Story So Far

A condensed timeline of how we got here.

2005-2007

The Housing Boom

Fannie Mae and Freddie Mac guarantee roughly half of all US mortgages. They are publicly traded companies with private shareholders, including preferred stockholders who bought in at par value ($25-$50 per share).

September 2008

Conservatorship

FHFA places both companies into conservatorship. Treasury injects $187.5 billion via Senior Preferred Stock Purchase Agreements (PSPAs) with a 10% dividend. Junior preferred dividends are suspended immediately.

2012

The Third Amendment (Net Worth Sweep)

Treasury replaces the 10% fixed dividend with a Net Worth Sweep — taking nearly ALL profits every quarter. This effectively strips the value from junior preferred shares. The companies have since returned over $300 billion to Treasury, far exceeding the original investment.

2012-2024

Litigation & Advocacy

Dozens of lawsuits challenge the Net Worth Sweep. Organizations like Investors Unite advocate for shareholder rights. The legal battles work through federal courts, with mixed results at various levels.

2025-2026

Political Momentum Builds

Administration signals support for ending the conservatorship. Bill Pulte is named FHFA Director. The Berkley verdict provides a legal roadmap. The question shifts from 'if' to 'how' and 'when.' Junior preferred shares trade below par, reflecting both opportunity and uncertainty.

Capital Structure (Who Gets Paid First)

U.S. Treasury Senior Preferred

Treasury holds senior preferred stock with a liquidation preference. This gets paid first in any restructuring. The terms of this position are the key variable in any recap scenario.

Junior Preferred Stock (FNMAS, FMCKJ, etc.)

The 36+ series of preferred stock issued to private investors before 2008. These have contractual par values ($25-$50), stated dividend rates, and seniority over common stock. This is where the opportunity and risk sit.

Common Stock (FNMA, FMCC)

Common equity sits at the bottom. Most vulnerable to dilution in a recapitalization. Higher upside ceiling but lower floor than preferred.

Risks

These are real risks. Anyone telling you GSE preferred is a sure thing is not being honest with you.

Political Risk

The conservatorship is fundamentally a political problem. Administration changes, Congressional gridlock, or policy reversals could delay or derail any recap plan. GSE reform has been 'imminent' for over a decade.

Dilution Risk

A recapitalization could involve issuing new shares that dilute existing preferred holders. Treasury could convert its senior preferred into common equity in ways that reduce junior preferred value.

Non-Cumulative Dividends

Most GSE preferred shares are non-cumulative. That means missed dividends from the past 18 years do NOT accrue. When dividends resume, they start fresh — you don't get back payments.

Liquidity Risk

GSE preferred shares trade OTC with wider bid-ask spreads and lower volume than NYSE-listed securities. Exiting a large position quickly at your target price can be difficult.

Indefinite Conservatorship

There is no guarantee the conservatorship will ever end. The government could maintain the status quo indefinitely, leaving preferred holders in limbo with no dividends and no path to par recovery.

Why I Am Long

I have held FNMAS, FMCKJ, and FMCCS since 2016. I have published over 300 articles on SeekingAlpha analyzing the GSE preferred thesis. I have written 8 books on the topic. My entire net worth is concentrated in these securities.

My thesis: the junior preferred shares have par values that dramatically exceed their current market prices. The companies are profitable — Fannie Mae alone generates $10B+ in annual net income. If the conservatorship ends with recapitalization terms that respect the existing capital structure, these shares are deeply undervalued.

I could be wrong. The conservatorship could last another decade. Treasury could restructure in a way that wipes out junior preferred. But I have studied this for 10+ years, and I believe the risk/reward is compelling. Read the full thesis at Fanniegate.

Important Disclaimer

I am not a financial advisor. This page reflects my personal views and is for educational purposes only. I hold significant positions in the securities discussed and have a direct financial interest in their outcome. Preferred stock investments carry significant risk, including the possibility of total loss. Always do your own research and consult a qualified financial advisor before making investment decisions.

Go Deeper

This page is the starting point. For the full thesis, trading history, and deep-dive analysis, explore these resources.

Fanniegate Starter Pack Glen's Books

Frequently Asked Questions

What are Fannie Mae preferred shares?

Fannie Mae preferred shares are 26 series of preferred stock issued by the Federal National Mortgage Association (Fannie Mae) before the 2008 conservatorship. They have fixed par values ($25 or $50), stated dividend rates (ranging from approximately 4% to 8.25%), and seniority over common stock. Dividends have been suspended since 2008. They trade on the OTC market under tickers like FNMAS, FNMFN, FNMAH, and others.

What is the difference between FNMA and FNMAS?

FNMA is the ticker for Fannie Mae common stock — equity shares that represent ownership in the company. FNMAS is one of 26 series of Fannie Mae preferred stock (specifically Series S, the 8.25% non-cumulative preferred). Preferred stock has priority over common stock for dividends and liquidation proceeds, carries a fixed par value ($25 for FNMAS), and has a contractual dividend rate. Common stock has no par value protection but offers more upside potential.

Why are FNMAS dividends suspended?

FNMAS dividends have been suspended since September 2008 when FHFA placed Fannie Mae into conservatorship. The Third Amendment in 2012 further entrenched this by sweeping nearly all profits to Treasury. Dividend resumption requires the conservatorship to end and a recapitalization plan that addresses Treasury's senior preferred position first.

What would FNMAS be worth if the conservatorship ends?

Nobody knows for certain. FNMAS has a par value of $25, which represents its contractual value. In a full par recovery scenario, FNMAS would be worth $25 per share plus resumed dividends at the 8.25% coupon rate ($2.0625/year). In partial recovery scenarios, the value depends on the specific terms of Treasury's restructuring. There is also a scenario where preferred holders receive significantly less than par. Use the FNMAS dividend calculator on this site to model different outcomes.

Is Glen Bradford a financial advisor?

No. Glen Bradford is not a financial advisor, broker, or registered investment professional. He is an individual investor and writer who shares his personal investment thesis and analysis publicly. The content on this site reflects his personal views and is for educational purposes only. He holds significant positions in the securities discussed and has a direct financial interest in their outcome. Always consult a qualified financial advisor before making investment decisions.

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