Fannie Mae Shares Face Headwinds as Policy Shifts Stall Privatization Hopes

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Fannie Mae's stock continues to struggle, reflecting a significant shift in its operational mandate and the dimming prospects for its return to private ownership. The shares, which consolidated at $8.87 in recent trading, have declined 19.4% since the start of the year. This downturn is largely a reaction to a new federal directive requiring the government-sponsored enterprise (GSE), along with Freddie Mac, to purchase $200 billion in mortgage-backed securities (MBS), a move with profound implications for its capital planning and independence.

The core issue for investors is a clarified mandate from the Federal Housing Finance Agency (FHFA). The regulator confirmed that Fannie Mae and Freddie Mac will not expand their MBS holdings beyond the stipulated $200 billion ceiling. While this program is designed to support the U.S. housing market by applying downward pressure on mortgage rates, it represents a pivot away from capital accumulation for privatization.

According to a report from Inside Mortgage Finance, industry critics and experts now view the long-anticipated recapitalization and potential exit from government conservatorship as effectively "on ice." This marks a stark reversal for a stock that had surged 212.8% by early December 2025 on fervent speculation about a swift privatization. The company is now compelled to leverage its balance sheet more directly for political objectives—specifically, achieving lower mortgage rates—rather than prioritizing financial independence.

Mortgage Market Dynamics Show Mixed Signals

The immediate impact of the GSEs' buying program on the mortgage market appears muted. Although the average 30-year fixed-rate mortgage initially dipped to a three-year low of approximately 6.06% during the week, data from January 23 showed a slight rebound to 6.09%.

Furthermore, the Federal Reserve continues to reduce its own MBS portfolio by about $15 billion monthly. This ongoing quantitative tightening counteracts the liquidity injection from Fannie Mae's purchases, complicating efforts to achieve a sustained easing of borrowing costs.

The sector backdrop remains challenging. Several major financial institutions recently reported strains in their mortgage operations. American Banker noted that U.S. Bank recorded an $11 million net write-down on Mortgage Servicing Rights (MSR) due to valuation adjustments. Meanwhile, JPMorgan Chase saw a $43 million quarterly decline in net servicing revenue.

Valuation Debate Intensifies Amid Policy Shift

Even after the recent sell-off, a substantial valuation gap persists. A late January analysis from Morningstar places the stock's fair value near $1.43. Compared to the current trading level of $8.87, this suggests a significant premium that analysts attribute almost entirely to priced-in privatization hopes.

This discrepancy raises a critical question: has the stock price adequately adjusted to the new political reality? The evidence suggests not. From both valuation and regulatory perspectives, the share price continues to reflect expectations that are increasingly at odds with the current policy framework, which explicitly employs Fannie Mae as a tool for economic and housing policy.

Technical Weakness Meets a Changed Fundamental Picture

From a chart perspective, the outlook remains bearish. The stock has shed 17.9% in the past month alone, approaching support zones that were last tested in late 2025. Some technical indicators, like the Relative Strength Index (RSI), are nearing oversold territory. While the platform StockInvest.us has flagged a momentum-based technical buy signal, it emphasizes the short-term, speculative nature of this reading.

The fundamental landscape, however, has undeniably shifted. Analysts conclude that as long as Fannie Mae and Freddie Mac are used as direct instruments for policy execution, the path to a public offering or a full recapitalization remains blocked. Investor attention is now turning to the evolving political narrative, particularly the interplay between the $200 billion MBS program and concurrent regulatory efforts to limit institutional purchases of single-family homes.