Michael Burry Takes a Major Position in Fannie Mae, Fueling Privatization Speculation

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Shares of the government-sponsored mortgage enterprise Fannie Mae surged 5.15% on Tuesday, closing at $12.04. The catalyst was a disclosure that prominent investor Michael Burry, famed for his "Big Short" bet against the housing market, has established a substantial stake in the company. His move coincides with new regulatory clarity from the Federal Housing Finance Agency (FHFA), which has set definitive multifamily loan purchase caps for 2026, providing stability for the mortgage market.

In a comprehensive 6,000-word analysis published on his Substack platform, Michael Burry laid out his thesis that Fannie Mae could be nearing a return to public markets. He argues that a relisting is imminent, but only under specific conditions. Key prerequisites, according to Burry, include a relaxation of capital requirements, the conversion of certain preferred shares to common stock, and a reduction of the government's dominant control.

Burry simultaneously cautioned that the path to an initial public offering would be "steep, winding, and rocky." His timing aligns with broader market speculation that a potential new U.S. administration may prioritize reprivatizing the entity.

Regulatory Framework and Market Confidence

Adding to the day's developments, the FHFA established the 2026 purchase limit for multifamily loans. Fannie Mae is authorized to acquire up to $88 billion in such mortgages next year. Combined with the identical limit for Freddie Mac, the total market cap is set at $176 billion. Loans designated for affordable housing are exempt from this ceiling, a measure intended to ensure ongoing liquidity in that crucial segment.

In a related show of institutional confidence, Fifth Third Bancorp announced the acquisition of the DUS (Delegated Underwriting and Servicing) lending business from Mechanics Bank. DUS lenders form an exclusive network authorized to originate loans directly for Fannie Mae, making this transaction a signal of faith in the underlying business model's durability.

Assessing the Investment Thesis and Inherent Risks

The recent share price appreciation, which totals roughly 21% over the past two weeks, positions Fannie Mae as a proxy for bets on political and regulatory shifts within the U.S. housing finance sector. Hedge fund manager Bill Ackman has long advocated for privatization, and Burry's sizable investment adds considerable weight to that narrative.

Valuation remains complex. While Fannie Mae operates profitably and provides trillions in mortgage market liquidity, its shares continue to trade over-the-counter, leading to greater volatility compared to listed peers. Common shareholders face dilution risk, contingent on how the U.S. Treasury handles its senior preferred stock warrants in any future restructuring.

On a fundamental level, economists at Fannie Mae project that the average 30-year mortgage rate will decline to approximately 6% by the end of 2025. Such a decrease could stimulate refinancing activity and boost fee income. From a technical analysis perspective, market strategists have identified the $13.62 level as a key resistance point that must be breached to signal a sustainable trend reversal.

Key Data Points:
* Investor Michael Burry holds a "substantial position" in Fannie Mae.
* FHFA sets 2026 multifamily loan purchase cap at $88 billion for Fannie Mae.
* Fifth Third Bancorp acquires the DUS business of Mechanics Bank.
* Fannie Mae's stock has gained approximately 21% in a two-week period.