By Joe Light
As painful as the past week has been for stocks, investors in shares of Fannie Mae and Freddie Mac are having it worse. A confluence of events makes it one of the worst possible environments for a potential Fannie-Freddie share offering.
On Thursday, shares of Fannie plummeted 16% at the open to $3.89, while shares of Freddie fell 12.3% to $3.56. The mortgage-finance giants are down more than 30% since last Friday's close and more than 75% since their 52-week highs in September. The common shares are now below even where they traded when President Donald Trump took office.
That likely surprises many investors. The shares soared after Trump's election on the expectation that he would take steps to release the companies from government control, and they rocketed even more after Trump confirmed on social media that he wanted to take the companies public.
Administration officials like Federal Housing Finance Agency Director Bill Pulte, whose agency controls the companies, and Commerce Secretary Howard Lutnick several times over the past year have indicated that a share offering is coming soon. But several factors have kept those promises from coming to fruition.
The first is that selling shares of Fannie and Freddie is a delicate proposition even in good times. Fannie and Freddie form the backbone of the U.S. housing finance system. They don't make mortgages themselves, but buy them from lenders and bundle them into mortgage-backed securities, guaranteeing to make the MBS investors whole in case borrowers default.
The process frees up cash for banks and other lenders to make even more loans and is credited in part for making possible the 30-year fixed-rate mortgage, which is hard to come by in countries outside the U.S.
The government took control of the companies in 2008, eventually injecting them with billions of dollars in bailout money. The government in return received warrants to acquire nearly 80% of the companies' common shares as well as a new class of "senior" preferred stock. The deal made the government the companies' biggest shareholder and gave the president the ultimate power over whether and when to release the companies from government control.
All that means that any tinkering with Fannie and Freddie's status also risks destabilizing the MBS market and driving mortgage rates higher. In recent months, administration officials have said that Trump is more likely to make a less drastic move, such as selling some of the government's shares, rather than one that gives up control of Fannie and Freddie.
A small share sale of Fannie and Freddie stock isn't as likely to upset the bond market as a more comprehensive restructuring, but the economic instability stemming from the war in Iran is making it less likely that the White House wants to take even that risk.
Since the end of February, the 30-year mortgage rate has jumped 0.37 percentage point to 6.36%, according to Mortgage News Daily. The Federal Reserve looks less and less likely to cut rates in the near term, and soaring oil prices threaten to reignite inflation, helping to kill a nascent housing market recovery.
This is all happening while Trump and the GOP are entering the November midterm election campaign, and affordability and the economy are top issues for voters.
In short, it's the worst possible environment for Trump to roll the dice on restructuring Fannie and Freddie. White House officials have gone mostly silent on the issue in recent weeks.
Earlier this month, Senate Banking Committee Chairman Tim Scott (R., S.C.) told Semafor that he didn't expect the White House to try to take the companies out of government control until after the midterm elections.
The White House didn't immediately respond to requests for comment.
There's still plenty of hope for Fannie-Freddie investors, even if the payoff won't be immediate. If the economic environment improves, Trump officials after the midterms will still have more than two years to make changes to Fannie and Freddie, including a potential share offering.
If they do turn back to Fannie-Freddie reform, the challenges to pulling off an offering will be the same as they've always been.
Advocates of a smaller footprint for Fannie and Freddie want the companies to have high capital requirements. Shareholders in the companies think the requirements are already too high. The government's own stake in the companies -- if not modified -- could wipe out existing shareholders. MBS investors don't want to see a new arrangement that lowers the value of their bonds, and the rest of the housing industry and affordability advocates want mortgage rates to stay low.
The Iran War might be a thing of the past next year, but those enduring hurdles to releasing the companies aren't going away.
Write to Joe Light at joe.light@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 19, 2026 12:09 ET (16:09 GMT)
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