What Are FNMA Junior Preferred Shares?
Fannie Mae (Federal National Mortgage Association) issued 26 series of junior preferred stock between 1998 and 2008. These shares were sold to institutional and retail investors and traded publicly on OTC markets. Each series carries a specific dividend coupon rate and par value.
Junior preferred shares sit below Treasury’s senior preferred stock in the capital structure but above common equity. They were designed to pay regular quarterly dividends based on their coupon rates, providing investors with steady income backed by Fannie Mae’s enormous mortgage guarantee business.
When Fannie Mae entered FHFA conservatorship in September 2008, all dividend payments on preferred and common stock were suspended. The 2012 Net Worth Sweep directed virtually all GSE profits to Treasury, making resumption impossible. Preferred shareholders have received no dividends since 2008 — but the shares remain outstanding obligations.
Why They Matter Now
With FHFA Director Bill Pulte signaling support for ending conservatorship, Treasury Secretary Scott Bessent discussing recapitalization, and the March 2026 executive order naming FHFA directly — preferred shares are at the center of the recap conversation. If dividends resume and shares trade toward par, the upside from current prices is substantial.
Fixed vs Variable Rate Preferred Shares
Fixed Rate (16 series)
Predictable Income
Fixed-rate preferred shares pay a set percentage of par value every quarter. The coupon never changes regardless of interest rate movements.
Rates range from 4.25% (Series O) to 8.25% (Series S and T). Higher-coupon shares are more valuable if dividends resume.
Preferred by investors who want certainty. If rates fall, fixed-rate shares become even more attractive relative to new issuances.
Variable Rate (10 series)
Rate-Sensitive Upside
Variable-rate preferred shares pay a coupon tied to a benchmark rate plus a spread. Historically tied to LIBOR, these now reference SOFR.
In a higher interest rate environment, variable-rate shares could pay substantially more than their fixed-rate counterparts.
Preferred by investors who believe rates will stay elevated or rise further. Provides a natural hedge against interest rate risk.
Portfolio strategy: Many FNMA preferred investors hold a mix of both types. Fixed-rate shares (especially the 8.25% Series S and T) offer the highest guaranteed yield if dividends resume. Variable-rate shares provide upside optionality if interest rates remain elevated. The choice depends on your rate outlook and risk tolerance.
What Happens to Preferred Shares in a Recap?
The recapitalization of Fannie Mae is the defining event for preferred shareholders. How it plays out determines whether these shares are worth par value, something less, or remain in limbo. Here are the three scenarios.
Bull Case
Full Recovery
Conservatorship ends. Preferred dividends resume in full. Shares trade back toward par values ($25 or $50).
Treasury negotiates a deal that honors existing preferred obligations. The senior preferred is restructured or retired. Junior preferred holders are made whole.
From current OTC prices, this represents significant multiples of upside plus resumed dividend income.
Base Case
Partial Recovery
Conservatorship ends with a negotiated settlement for preferred holders. Shares may be exchanged for new securities at a discount to par, or dividends resume at a reduced rate.
This scenario still represents meaningful upside from current trading levels but involves haircuts relative to full par recovery.
The most commonly modeled scenario. Still highly profitable for shareholders who bought at current prices.
Bear Case
Continued Suspension
Conservatorship continues indefinitely. Dividends remain suspended. Political will fades or legal obstacles prevent resolution.
Preferred shares remain in OTC purgatory, trading as speculative instruments with no income stream and no clear path to resolution.
This has been the status quo since 2008. The risk is that nothing changes despite the current political momentum.
Current Landscape
As of March 2026, the political environment is the most favorable for preferred shareholders since conservatorship began. FHFA Director Bill Pulte supports ending conservatorship. Treasury Secretary Scott Bessent has discussed recapitalization. Commerce Secretary Howard Lutnick has advocated for a GSE IPO. The March 13, 2026 executive order directing FHFA to reduce regulatory burdens further accelerates the timeline.
How to Buy FNMA Preferred Shares
Fannie Mae preferred shares trade over-the-counter (OTC) under their respective ticker symbols. They are not listed on NYSE or NASDAQ but are accessible through most major brokerages.
Step 1
Open an account at a brokerage that supports OTC trading: Fidelity, Charles Schwab, Interactive Brokers, E*TRADE, or similar.
Step 2
Search for the specific ticker symbol (e.g., FNMAS, FNMAT, FNMAJ). OTC tickers may appear with suffixes depending on your platform.
Step 3
Place a limit order (not market order). OTC spreads can be wide, so limit orders help you control your entry price.
OTC securities may have lower liquidity than exchange-listed stocks. Bid-ask spreads can be wider, especially on less actively traded series. Consider splitting larger orders across multiple series for diversification.
Frequently Asked Questions
What are FNMA junior preferred shares?
FNMA junior preferred shares are 26 series of preferred stock issued by Fannie Mae (Federal National Mortgage Association). They sit below the senior preferred stock held by the U.S. Treasury in the capital structure but above common equity. Each series has a specific coupon rate (dividend rate) and par value, and they traded on OTC markets under tickers like FNMAS, FNMAT, FNMAJ, and others. Dividends have been suspended since conservatorship in 2008.
Why were Fannie Mae preferred dividends suspended?
When Fannie Mae entered conservatorship in September 2008, the Federal Housing Finance Agency (FHFA) suspended all dividend payments on both common and preferred stock. The rationale was to preserve capital. In 2012, the Net Worth Sweep further directed virtually all GSE profits to the U.S. Treasury, making dividend resumption impossible. The preferred shares have not paid dividends since 2008, though they remain outstanding obligations of the company.
What is the difference between fixed and variable rate FNMA preferred shares?
Fixed-rate preferred shares pay a set coupon — for example, FNMAS pays 8.25% on its $50 par value. Variable-rate preferred shares pay a coupon that adjusts based on a benchmark rate (typically LIBOR or its successor SOFR, plus a spread). In a rising rate environment, variable-rate shares could pay higher dividends than fixed-rate shares if dividends resume. Fixed-rate shares offer more predictability. Many investors hold a mix of both.
What happens to FNMA preferred shares in a recapitalization?
In a full recapitalization and release from conservatorship, the bull case is that preferred dividends resume and share prices recover toward their par values ($25 or $50 per share). Many preferred series currently trade at steep discounts to par, meaning the upside in a successful recap is substantial. The exact treatment of preferred shares will depend on negotiations between FHFA, Treasury, and the companies. Some scenarios involve converting preferred shares into common equity; others involve honoring them at par.
How do I buy Fannie Mae preferred stock?
Fannie Mae preferred shares trade over-the-counter (OTC) under their respective tickers (FNMAS, FNMAT, FNMAJ, etc.). You can buy them through most major brokerages — Fidelity, Charles Schwab, TD Ameritrade, Interactive Brokers, E*TRADE, and others all support OTC trading. Search for the specific ticker symbol in your brokerage platform, and you can place a limit order like any other stock. Be aware that OTC spreads can be wider than exchange-listed securities.
What is the par value of FNMA preferred shares?
Fannie Mae preferred shares have par values of either $25 or $50 per share, depending on the series. The $50 par value shares include FNMAS (Series S) and FNMAT (Series T), which also carry the highest fixed coupon rate at 8.25%. Most other series have a $25 par value. Par value represents the face value of the share and the amount on which the coupon rate is calculated. In a recap scenario, preferred shares could trade toward their respective par values.
Which FNMA preferred series has the highest dividend rate?
FNMAS (Series S) and FNMAT (Series T) have the highest fixed coupon rate at 8.25% on a $50 par value, meaning they would pay $4.125 per share annually if dividends resumed. Among the $25 par value shares, FNMFO (Series R) has the highest fixed rate at 7.625%, which would pay $1.90625 per share annually. Variable-rate shares could potentially pay more depending on prevailing interest rates at the time dividends resume.
Are Fannie Mae preferred shares cumulative?
Fannie Mae junior preferred shares are generally non-cumulative, meaning missed dividends do not accrue and are not owed to shareholders as a backlog. However, under the terms of the preferred stock agreements, the company cannot pay dividends on common stock unless preferred dividends are current. In a recapitalization scenario, the value proposition for preferred shareholders rests on future dividend resumption and share price recovery toward par, rather than recovery of past missed dividends.
What is the difference between Fannie Mae preferred stock and the Treasury senior preferred?
The U.S. Treasury holds a special class of senior preferred stock in Fannie Mae, created as part of the 2008 bailout. This senior preferred stock sits above all 26 series of junior preferred stock in the capital structure, meaning Treasury gets paid first. The senior preferred stock purchase agreement (PSPA) includes terms like the Net Worth Sweep. Any recapitalization must address Treasury's senior preferred position before junior preferred shareholders see full recovery. This is a central negotiation point in any recap scenario.
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Read moreDisclaimer: Glen Bradford holds Fannie Mae and Freddie Mac junior preferred stock across 26 series and has a direct financial interest in these companies. This page is for informational and educational purposes only. Nothing here constitutes financial, investment, legal, or tax advice. Past performance does not guarantee future results. Do your own research and consult qualified professionals before making any investment decisions. All information is believed to be accurate as of the date of publication but may be subject to change.