By Shaina Mishkin

Traders eyeing an eventual end to government control of two secondary mortgage market giants sent shares of Fannie Mae and Freddie Mac climbing more than 200% this year.

The stocks' biggest tailwind, the Trump administration's plans for the two companies' futures, is also their most immediate risk, Wedbush analyst Henry Coffey wrote in a Friday note.

Both companies' common stocks, which trade on OTC Markets, have climbed since Donald Trump was elected president in November 2024. Fannie Mae was up 232% this year as of midday Friday, while Freddie Mac was 214% higher.

Traders are betting on a new public offering in the short-term and eventual release from government conservatorship in the long-term. But there hasn't been much news recently from the Federal Housing Finance Agency, the companies' conservator, or the Treasury, which holds the government's stake in both companies.

The Trump administration was expected to act to end the companies' long-running government conservatorship, which began in 2008 -- but it's a tricky issue with no easy path that satisfies all stakeholders, including U.S. homeowners, buyers, taxpayers, mortgage-backed securities investors and the companies' shareholders.

The course of the policy will determine how the common shares will perform. "The immediate risk factor inherent in our investment view is the uncertainty about exactly what course the administration is likely to pursue," Coffey wrote.

Coffey is far from a bear. He initiated coverage of Freddie Mac common shares with an Outperform rating and $13.35 price target. Friday's initiation follows the brokerage's late November upgrade of Fannie Mae common shares to Outperform, from Underperform, with a $11.50 price target.

Coffey evaluated several paths for the companies' eventual exit from conservatorship, which requires building their capital reserves and deciding how to handle the government's senior preferred equity.

"The immediate risk factor inherent in our investment view is the uncertainty about exactly what course the administration is likely to pursue to monetize its investment in [Freddie Mac] and ultimately recap and release (from conservatorship) both government sponsored entities (GSEs, Fannie Mae and Freddie Mac)," he wrote. "We see a reasonable probability that the administration will proceed in a manner that does not put current share value at risk and that raises the capital needed for [Freddie Mac] to exit conservatorship and, to transfer mortgage risk back to the private sector over time."

Clarity is likely coming, Coffey noted in a call with Barron's. "[Administration officials] need to come out, most likely in the first quarter if not during the first half of next year, and put forward a comprehensive capital plan, tell people what they're going to do, and let the market adjust," he said.

"We've got a lot of opinions floating around -- but no comprehensive plan yet," he added.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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December 12, 2025 12:28 ET (17:28 GMT)

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