FNMA Stock Forecast: Fannie Mae Shares Rally on Housing Market Hopes—Should You Buy Before the Next Fed Move?

Fannie Mae (OTC: FNMA) shares are back in the spotlight this week after multiple headlines signaled that the U.S. government may finally move to unwind its 2008 conservatorship of the mortgage-finance giant. Momentum began late Friday when The Wall Street Journal reported that the Trump Administration is drafting plans for an initial public offering of both Fannie Mae and Freddie Mac that could raise as much as $30 billion and begin before year-end. Over the weekend, Axios and other outlets corroborated the timing, adding that officials are weighing a multistep offering that would first sell a minority stake while maintaining some federal backstop. The drumbeat grew louder Monday after billionaire investor Bill Ackman told Reuters he is urging policymakers to merge Fannie and Freddie into a single entity before any share sale in order to “simplify the capital structure and maximize taxpayer recovery.” Ackman, whose Pershing Square fund has long held junior preferreds of both companies, argued that combining them would create a more liquid, investable security and could add billions to Treasury coffers. Why it matters for FNMA stock • Potential IPO exit: An offering would convert today’s thinly traded over-the-counter shares into a nationally listed security, vastly increasing liquidity and index eligibility—two catalysts that historically attract institutional money. • Capital restoration: Analysts estimate Fannie needs roughly $180 billion in total capital to meet post-crisis safety rules. A multistage IPO combined with retained earnings could get the company most of the way there without a disruptive one-and-done sale. • Litigation overhang: Several shareholder lawsuits challenging the government’s profit sweep could move toward resolution once a timetable for privatization is set, removing a decade-long legal cloud. How the market is reacting FNMA stock surged more than 40 % in pre-market trade Monday before paring gains to about 28 % by midday, its highest level since February 2024. Trading volumes topped 75 million shares—nearly 10 × the 30-day average—as retail speculators piled into both common and preferred issues, according to intraday FINRA data. Technical analysts at Seeking Alpha noted that last week’s breakout above $2.50 completed a 12-month “cup-and-handle” base that targets the $4.25–$4.50 zone if follow-through buying persists. Key hurdles ahead • Congressional sign-off: While Treasury can initiate an IPO, any permanent changes to the housing-finance system—including a merger or revised affordable-housing mandate—would likely require new legislation, a tall ask in an election year. • Capital requirements: The FHFA’s Enterprise Regulatory Capital Framework (ERCF) still demands a leverage ratio near 10 %, far above global bank standards. Until those rules are eased—or unless the IPO is upsized—future returns on equity could be capped in the mid-single digits. • Rate-market volatility: Mortgage spreads have widened sharply amid expectations of higher for longer Fed policy. A prolonged backup in rates could dent origination volumes and, by extension, Fannie’s fee income just as investors are parsing projections. What to watch next 1. FHFA Director appointments: A new appointee could recalibrate capital rules or endorse the Ackman merger. 2. Q2 2025 earnings call (July 30): Management is expected to provide updated capital and credit-risk guidance ahead of any formal IPO filing. 3. Treasury term sheet: Details on share classes, government warrants, and the timeline for selling the taxpayer’s 79.9 % stake will clarify dilution risk for existing FNMA shareholders. Bottom line The path out of conservatorship has frustrated investors for 15 years, but the latest flurry of policy signals suggests Washington is finally ready to pull the trigger. If an IPO plan is formally unveiled this fall, FNMA stock could transition from speculative bet to mainstream housing-finance play—yet significant political, regulatory, and market headwinds remain. Traders chasing today’s momentum should be prepared for headline whiplash, while long-term investors may find the greatest reward in monitoring how capital rules and merger talks evolve in the weeks ahead.