Written by: Internal Analysis & Opinion Writers
Shares of Fannie Mae and Freddie Mac are heading toward a difficult end to September as investors become increasingly skeptical that the two mortgage finance giants will soon emerge from government conservatorship. Fresh analyst price-target cuts have added to the uncertainty, putting additional pressure on stocks that have already experienced steep declines this year.
Fannie Mae shares have fallen more than 23% during September, putting the stock on pace for its worst monthly performance of 2026. Freddie Mac has experienced an even steeper decline, losing more than 25% during the month and heading toward its weakest monthly showing since January.
The latest pressure came after Keefe, Bruyette & Woods sharply reduced its price targets for both government-sponsored enterprises. KBW lowered its target for Fannie Mae to $3.50 from $6.25, a reduction of 44%. The firm also cut its Freddie Mac target to $3.50 from $6.50.
KBW maintained its Underperform ratings on both companies.
The brokerage's concerns are not primarily tied to the underlying earnings performance of Fannie Mae and Freddie Mac. In fact, KBW said it continues to anticipate "robust earnings" from the mortgage companies. Instead, the firm's caution centers on what those earnings ultimately mean for holders of the publicly traded common shares while the companies remain under federal control.
Fannie Mae and Freddie Mac have operated under Federal Housing Finance Agency conservatorship since September 2008, when the federal government intervened during the housing and financial crisis. The companies continue to play a central role in the U.S. housing finance system by purchasing mortgages from lenders and supporting liquidity in the secondary mortgage market.
For investors, however, the question has increasingly become whether the government will eventually return the companies to private ownership and, if so, what that transition would mean for existing shareholders.
KBW said it sees a growing possibility that privatization may not occur. Even if the government ultimately moves forward with a restructuring, the brokerage warned that common shareholders could face substantial dilution if the Treasury Department's senior preferred shares are converted into common stock.
That issue has become one of the most important variables affecting the investment outlook for both companies. The federal government's financial interests would need to be addressed as part of any major restructuring, meaning that an exit from conservatorship would not automatically translate into a windfall for current common shareholders.
The Trump administration revived discussion surrounding the future of Fannie Mae and Freddie Mac in 2025, raising expectations that the companies could eventually leave conservatorship through a transaction involving public share offerings.
President Donald Trump kept that possibility alive in June when he was asked whether an offering had been taken off the table.
"No, it's not," Trump said. "We're thinking about an IPO for that. It's not a rush."
Those comments confirmed that an offering remained under consideration, but the absence of a finalized timetable has continued to weigh on investors hoping for faster progress.
Market performance reflects that growing uncertainty. Fannie Mae shares have declined more than 57% during 2026, while Freddie Mac shares have fallen nearly 60%, according to the Stocktwits report carried by Yahoo Finance. The declines represent a sharp reversal from the optimism that previously surrounded the possibility of privatization.
Retail investors also appear increasingly cautious. Stocktwits classified sentiment surrounding both Fannie Mae and Freddie Mac shares as bearish at the time of the original report, although individual traders remained divided over whether the steep decline represented additional downside risk or a potential buying opportunity.
One Stocktwits user expressed a more optimistic view of the downturn, writing that investors could "enjoy this ride down" while accumulating additional shares in hopes of a future recovery. The comment illustrates the speculative nature of the trade, with some investors continuing to bet that eventual government action could significantly change the companies' valuations.
The fundamental businesses remain important components of the mortgage market regardless of what happens to their publicly traded shares. Fannie Mae and Freddie Mac provide liquidity by purchasing qualifying mortgages from lenders, packaging loans into mortgage-backed securities, and guaranteeing credit risk. Their continued profitability, however, is separate from the question of how much value ultimately flows to existing common shareholders.
That distinction is becoming increasingly important as analysts evaluate the companies. Strong operating earnings do not eliminate the uncertainty surrounding Treasury's senior preferred position, potential dilution, capital requirements, government guarantees, and the conditions that would accompany any eventual restructuring.
Ultimately, September's selloff demonstrates how closely Fannie Mae and Freddie Mac shares remain tied to expectations surrounding government policy rather than earnings alone. Privatization and an eventual public offering remain possibilities under consideration, but no finalized timetable has been announced. Until the government provides greater clarity about conservatorship, Treasury's ownership interests, and the treatment of existing shareholders, both stocks are likely to remain highly sensitive to policy announcements and analyst assessments.
