Key Takeaways
- The proposed merger of Fannie Mae and Freddie Mac into a single entity—tentatively named the Great American Mortgage Corporation—could result in a $500 billion IPO, with an initial float raising up to $75 billion.
- Share prices for both GSEs have surged, with FNMA rising over 20% to $9.99 and FMCC likewise gaining 20.91% to reach $7.98 as of August 2025.
- While privatisation may bring operational efficiencies and public revenue, concerns remain around housing affordability and increased mortgage rates.
- Forward earnings projections vary significantly: FNMA shows a robust $2.66 EPS, while FMCC posts zero, highlighting conservative legacy burdens.
- Execution risks include political backlash, regulatory scrutiny, and potential macro shocks such as inflation or delinquencies in housing loans.
The prospect of merging Fannie Mae and Freddie Mac into a single entity, potentially dubbed the Great American Mortgage Corporation, followed by a blockbuster initial public offering, could reshape the US housing finance landscape in profound ways. With these government-sponsored enterprises (GSEs) backing trillions in mortgages, such a move under the Trump administration might unlock vast shareholder value while introducing new risks to mortgage rates and home affordability.
Reviving Privatisation Ambitions
Plans to consolidate Fannie Mae and Freddie Mac have gained traction amid reports of administration deliberations, aiming to end their long-standing conservatorship imposed after the 2008 financial crisis. The proposed merger would create a behemoth overseeing an estimated $12 trillion in mortgage assets, streamlining operations and potentially enhancing efficiency in the secondary mortgage market. Sources including Politico and The New York Times indicate that an IPO could value the combined entity at around $500 billion, with an initial sale of 5% to 15% of shares generating up to $75 billion in proceeds—dwarfing recent listings and rivalling history’s largest offerings.
This isn’t merely a financial engineering exercise; it’s a strategic pivot. By merging the duo into the Great American Mortgage Corporation, the government could retain oversight and guarantees on existing mortgages, as outlined in Reuters coverage from May 2025, while shifting future risks to private investors. The appeal lies in fiscal relief: the US Treasury holds warrants for about 80% of the GSEs’ common stock from the bailout era, and a successful IPO might yield a windfall exceeding $250 billion, per analyst estimates cited in various financial reports.
Market Reactions and Valuation Shifts
Share prices of the GSEs have surged dramatically in response to these developments. As of market close on 10 August 2025, Fannie Mae (FNMA) settled at $9.99, marking a 20.51% gain from its previous close of $8.29, with trading volume spiking to over 10 million shares—well above its 10-day average. Similarly, Freddie Mac (FMCC) ended at $7.98, up 20.91% from $6.60, on volume exceeding 4 million shares. These moves reflect investor enthusiasm, pushing FNMA’s market capitalisation to approximately $11.6 billion and FMCC’s to $5.2 billion.
Comparing to historical benchmarks, FNMA’s price has climbed 792% over the past 52 weeks from a low of $1.08, while FMCC has risen 646% from $1.04. Yet, valuations remain intriguing: FNMA trades at a forward P/E of 3.76 based on expected EPS of $2.66, suggesting potential undervaluation if privatisation unlocks earnings growth. FMCC, with a negative book value of -$6.81, carries a price-to-book of -1.17, highlighting the balance sheet strains from conservatorship but also the upside from restructuring.
Implications for Housing and the Economy
A merger and IPO could inject liquidity into the housing sector, but not without turbulence. The GSEs’ role in securitising mortgages underpins affordable home loans, and any perceived weakening of government backing—despite assurances—might elevate borrowing costs. Axios reports warn that signals of reduced federal involvement could ripple through mortgage rates, potentially adding 0.5% to 1% to 30-year fixed rates, according to some economist models. This comes at a precarious time, with US home prices already inflated and affordability at multi-decade lows.
On the flip side, privatisation advocates argue it would foster competition and innovation. A consolidated Great American Mortgage Corporation might better navigate interest rate volatility, drawing on combined resources to expand into underserved markets. Analyst sentiment, as tracked by professional sources like S&P Global, leans cautiously optimistic: a consensus rating of 4.5 (underperform) for both stocks reflects legacy risks, but forward-looking models from firms such as KBW project robust EPS growth post-IPO, with potential dividends resuming after years of suspension.
- Revenue Potential: Combined, the entities reported over $100 billion in net interest income last year; a merged operation could optimise this through cost synergies, targeting 10–15% efficiency gains per internal projections.
- Risk Factors: Regulatory hurdles remain, including FHFA approval and antitrust scrutiny, which could delay timelines beyond 2025.
- Investor Appeal: Hedge funds and institutional buyers are eyeing the IPO as a play on housing recovery, with sentiment from Wall Street Journal reports indicating strong demand for shares in a $30 billion-plus float.
Historical Context and Forward Projections
Recall that Fannie and Freddie were placed under conservatorship in 2008 after amassing toxic assets, with the government injecting $187 billion in bailouts. They’ve since repaid $318 billion, turning a profit for taxpayers, but privatisation has been a perennial debate. The current proposal echoes earlier Trump-era ideas from 2019–2020, now amplified by merger talks.
Looking ahead, analyst-led forecasts from Reuters and The Economic Times suggest the IPO could occur as early as late 2025, raising $30 billion initially. Model-based projections from Morningstar estimate a post-merger entity could achieve 8–10% annual revenue growth through 2030, assuming stable housing demand. However, if inflation persists or recession hits, EPS could falter—forward estimates for FNMA at $2.66 assume benign conditions, while FMCC’s zero forward EPS highlights ongoing uncertainties.
| Metric | FNMA | FMCC | Combined Projection |
|---|---|---|---|
| Market Cap (10 Aug 2025) | $11.57B | $5.19B | ~$500B (Est.) |
| 52-Week High | $11.91 | $8.90 | N/A |
| Forward EPS | $2.66 | $0.00 | $3.50 (Model Est.) |
| Volume (Latest Session) | 10.37M | 4.01M | N/A |
Navigating the Uncertainties
While the merger-IPO narrative captivates markets, execution risks loom large. Political opposition could emerge if perceived as favouring Wall Street over homeowners, and any spike in delinquencies—currently at 0.6% for GSE-backed loans—might derail plans. Darkly amusing, perhaps, that entities born from crisis could spark another if mishandled, yet the potential for a “great American” revival in mortgage finance offers a compelling thesis for bold investors.
In sum, this proposed consolidation and public listing represents a high-stakes bet on privatising America’s housing backbone. With shares already reflecting speculative fervour, the real test will be whether the Great American Mortgage Corporation delivers stability or merely redistributes risks in an already frothy market.
References
- Axios. (2025, August 8). Fannie, Freddie IPO discussions signal U.S. mortgage policy shift. https://www.axios.com/2025/08/08/fannie-freddie-trump-stock-sale-ipo
- CNN. (2025, August 8). Fannie and Freddie IPOs may redefine U.S. housing finance. https://www.cnn.com/2025/08/08/business/fannie-freddie-ipo
- Economic Times. (2025). Trump prepares $500 billion IPO for Fannie Mae and Freddie Mac. https://economictimes.indiatimes.com/news/international/us/fannie-mae-and-freddie-mac-ipo-2025-trump-prepares-500-billion-ipo-for-fannie-mae-and-freddie-mac-could-fetch-30-billion-biggest-in-years/articleshow/123192577.cms
- New York Times. (2025, August 8). Trump administration considers privatisation of GSEs. https://www.nytimes.com/2025/08/08/business/trump-fannie-mae-freddie-mac-mortgages.html
- Politico. (2025, August 8). Fannie Mae and Freddie Mac public offering plans advance. https://www.politico.com/news/2025/08/08/fannie-mae-freddie-mac-public-offerings-trump-00499944
- Reuters. (2025, May 27). Trump says U.S. will retain oversight in GSE spin-off. https://www.reuters.com/business/finance/trump-says-us-retain-oversight-guarantees-fannie-mae-freddie-mac-spinoff-2025-05-27/
- Reuters. (2025, August 8). Trump administration eyeing IPOs for Fannie Mae, Freddie Mac. https://www.reuters.com/business/trump-administration-eyeing-ipos-fannie-mae-freddie-mac-this-year-us-official-2025-08-08/
- UPI. (2025, August 9). Trump considers IPO for Fannie Mae and Freddie Mac. https://www.upi.com/Top_News/US/2025/08/09/Reports-Trump-considers-stock-IPO-for-Fannie-Mae-Freddie-Mac/5561754750684/
- Yahoo Finance. (2025). Trump admin planning Fannie Mae IPO. https://finance.yahoo.com/video/trump-admin-planning-fannie-mae-154848454.html
- AINVEST. (2025). Proposed IPO of Fannie and Freddie and market impact. https://www.ainvest.com/news/trump-proposed-fannie-mae-freddie-mac-ipo-implications-mortgage-finance-housing-markets-2508/
- X.com. (2025). Bartiromo, M., Schiff, P., Martin, R.D., Nawfal, M., DrJStrategy. Selected posts regarding GSE privatisation. https://x.com
