[Abridged Version] Fannie, Freddie, Trump & the Housing Crisis
Michael Burry
· Cassandra Unchained
· July 12, 2026 at 03:24
· ⏱ 1 min read
| Read on Substack ↗
Summary
The fate of Fannie Mae and Freddie Mac common stock depends on Treasury's decision on the Senior Preferred Stock liquidation preference. If the SPS LP is affirmed, shares collapse to low single digits; if deemed paid off, shares could rise 3-4x initially and 6-7x over time. A Trump executive order and upcoming FHFA report may catalyze a decision before warrant expiration in 2028, creating a binary event with asymmetric upside.
•The GSEs are not currently sending cash to Treasury; all retained earnings flow into the Senior Preferred Stock liquidation preference, which grows with retained earnings.
•If the SPS LP is affirmed by Treasury, FNMA/FMCC stocks will fall to the low single digits or lower; if deemed paid off, shares rise 3-4x from current levels initially and 6-7x in time, assuming warrant dilution.
•Executive Order 14393, signed March 13, 2026, gave the FHFA 120 days to report on mortgage credit efficiency; the report is due around July 11, 2026.
•The GSE warrants expire in September 2028, and the author expects action before the next presidential election, likely bringing Fannie and Freddie back into focus.
Read time1 min
Length1,843 chars
Categoryfinance
Ideas
Michael BurryFounder, Scion Asset Management; subject of The Big Short
The article outlines a scenario where if the Senior Preferred Stock liquidation preference is deemed paid off, Fannie Mae shares could rise 3-4x initially and 6-7x over time. The upcoming FHFA report
The article outlines a scenario where if the Senior Preferred Stock liquidation preference is deemed paid off, Fannie Mae shares could rise 3-4x initially and 6-7x over time. The upcoming FHFA report and Trump administration actions are potential catalysts for a favorable resolution.
Risk: If the SPS LP is affirmed instead, shares could fall to low single digits or lower, representing a total loss scenario for common equity.
Michael BurryFounder, Scion Asset Management; subject of The Big Short
Freddie Mac shares would benefit identically to Fannie Mae from the same binary event. The article treats the Twins as symmetric, with the same upside/downside based on the SPS LP decision.
Freddie Mac shares would benefit identically to Fannie Mae from the same binary event. The article treats the Twins as symmetric, with the same upside/downside based on the SPS LP decision.
Risk: Same as FNMA: affirmation of the SPS LP would drive shares to near-zero, as the retained earnings would be claimed by Treasury.
This newsletter, published July 12, 2026,
features Michael Burry
discussing FNMA, FMCC.
2 trade ideas extracted by AI with direction and confidence scoring.