Freddie Mac (OTC:FMCC) and Fannie Mae (OTC:FNMA) stocks drew retail attention during extended trading on Wednesday after U.S. President Donald Trump said he was “giving very serious consideration” to bring the mortgage giants public.
“Fannie Mae and Freddie Mac are doing very well, throwing off a lot of CASH (TSX:CASH), and the time would seem to be right,” Trump posted on Truth Social.
He said that he would consult Treasury Secretary Scott Bessent, Secretary of Commerce Howard Lutnick, and the Director of the Federal Housing Finance Agency William Pulte, among others, before making a decision soon.
Fannie and Freddie buy mortgages from lenders and either hold these mortgages in their portfolios or package the loans into mortgage-backed securities, with a guarantee of protection from the government regarding any losses.
The federal government gained control of the two companies after the 2008 financial crisis. Both companies are now profitable.
Trump allies and other Republicans believe that privatizing the two companies could boost the government’s coffers. House Republicans are currently divided on the fiscal deficit and a growing federal debt, which has topped $36 trillion.
Billionaire Bill Ackman, who has significant investments in the two companies, had also urged the government to consider a sale after saying it would benefit both the government and the shareholders. He has suggested that the US government would generate a profit of about $300 billion.
However, analysts have warned that any change in the government’s backing of the two companies could raise mortgage prices.
Retail sentiment on Stocktwits about both companies was ‘extremely bullish’, while retail chatter was ‘extremely high.’
“It’s a fig leaf to the conservative fiscal hawks who want to lower the deficit (as do I) because the money the government brings in from this will be significant and will be used for this purpose,” one user said.
Another user believed that the stocks could rise up to the mid-$30s with potential “major upside from there.”
Freddie Mac and Fannie Mae have gained 71.3% and 125% year-to-date (YTD), respectively.
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