Fannie Mae and Freddie Mac Sink More Than 12% as Mizuho Slashes Targets on Fading Privatization Hopes

Fannie Mae and Freddie Mac shares sank on Monday, Oct. 12, after Mizuho analysts downgraded both companies and cut their price targets by at least half. By 12:15 PM ET, Freddie Mac (FMCC) was down 14.50% at $3.15 and Fannie Mae (FNMA) was down 12.70% at $3.53. The analysts said higher mortgage rates and two policy headwinds make a quick exit from government conservatorship less likely.

What Mizuho changed

The note came from Mizuho analysts Dan Dolev, Eyal Ben-Eliyahu and Alexander Jenkins, according to Barron's. They downgraded both stocks, lowered Fannie Mae's price target to $5 from $10 and Freddie Mac's to $4 from $9, and cut their estimated probability of a fast exit from conservatorship by 2028.

Year-to-date figures are from Dow Jones Market Data as cited by Barron's. Both targets still sit above Monday's prices, at roughly 42% above for Fannie Mae and 27% above for Freddie Mac. Mizuho's earlier targets of $10 and $9, and its 30% and 20% odds, date to when it initiated coverage in May, per National Mortgage News. Both stocks trade over the counter, not on a major exchange.

Three headwinds

Higher mortgage rates. Mizuho said rising rates make privatization "more complicated politically." The average 30-year mortgage rate was 7.4% in the week of Oct. 8, up from 7.28% the week before and 6.3% a year earlier, according to Trading Economics.

Bigger balance sheets. Mizuho pointed to the position of Federal Housing Finance Agency director Bill Pulte that the two companies should buy more mortgages to hold on their own balance sheets.

Credit scoring changes. The analysts also cited recent changes to the credit scoring system. They expect the second and third headwinds to slow how fast the companies can build capital, while the first adds political complications. "We remain cautious until rates are lower and/or the other two are resolved," they wrote.

Why the conservatorship matters

The FHFA has overseen both companies since they were placed into conservatorship in 2008. The Treasury also holds senior preferred stock in them, which Mizuho says keeps common equity structurally subordinated. In its words, the investment case "is not about business quality, which is exceptional," but about how a 17-year conservatorship ends.

The stocks climbed going into President Donald Trump's second term on hopes that taking the companies out of conservatorship would be a priority, but official statements on an exit have been few. Investor Michael Burry added to the pressure in a Sunday blog post, writing that both stocks "have retraced essentially all their gains since Trump's election."

Barron's reported that Fannie Mae was on track for its lowest close since early January 2025 and Freddie Mac for its lowest since late December 2024. The FHFA, Fannie Mae and Freddie Mac did not immediately respond to requests for comment.