(Bloomberg) — Shares of long-dying preferred stock issued by Fannie Mae and Freddie Mac soared Wednesday amid speculation that Donald Trump will free the housing finance agencies from their crisis-era receivership.
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A $6 billion Freddie Mac perpetual issue sold in 2007 rose as much as 70%, the highest in more than three years. Fannie Mae’s $7 billion run issued around the same time rose nearly 68% from its pre-election close.
Trump’s return to the White House revives the prospect of preferred shareholders getting some money back after the US seized control of agencies during the 2008 financial crisis to prevent the housing market from collapsing. Returning it to the private sector could mean the end of restrictions on investor payments imposed by the US after it bailed out government-backed institutions. Holders have complained that the U.S. unfairly shifted profits to itself even after Fannie and Freddie were restored to health.
“The re-election of former President Donald Trump revives the effort to remove Fannie Mae and Freddie Mac from government conservatorship,” Bloomberg Intelligence analyst Ben Elliott wrote in a note. “However, a long process lies ahead and release remains a 2026-2027 prospect at best,” he wrote.
Fannie Mae’s other preferred stock ranges are up between 45% and 66% on Wednesday, while Freddie Mac shares are up between 20% and 62%, based on data compiled by Bloomberg.
The bailouts of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation were among the most controversial events of the global financial crisis. They stopped paying dividends on their preferred stock in September 2008, effectively making those assets a dead weight for investors because the shares pay no dividends and never have to be repaid because they are perpetual.
Freeing them from the conservancy was an idea floated during Trump’s first administration by Mark Calabria, director of the Federal Housing Finance Agency, then their top regulator. The effort stalled over concerns about disrupting the housing market.
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Fannie and Freddie don’t make mortgages, but they support most of the U.S. housing market. They purchase home loans from lenders, package them into securities and guarantee repayment of principal and interest to investors. The federal government took control of the companies during the 2008 crisis, eventually bailing them out with about $187.5 billion as defaults increased.
