Bill Ackman Says Freeing Fannie Mae and Freddie Mac From Government Control Could Unlock $500 Billion in Value, Just as Both Stocks Have Jumped Over 23% in the Past Month. Is Now the Time to Bet on That Payoff?

Bill Ackman, a prominent investor, believes that freeing Fannie Mae and Freddie Mac from government control could unlock $500 billion in value, despite their recent 23% uptick over the past month. These two entities play a critical role in the mortgage market by purchasing mortgages from banks and packaging them into mortgage-backed securities (MBS) for sale to investors.

Fannie and Freddie were placed in conservatorship by the U.S. Treasury Department following the Great Recession due to excessive subprime mortgage exposure. The companies have built over $200 billion in equity since 2019, and Ackman and his team estimate their combined capital could exceed $375 billion within the next five years.

The $500 billion figure Ackman mentioned could be achieved if both companies were released from conservatorship, as cited by anonymous Trump officials in a 2025 Wall Street Journal report. However, there are several hurdles in this process, such as dilution from the Treasury Department's senior preferred stock and warrants, which could lower the ownership structure for investors.

Additionally, the potential increase in MBS yields and mortgage rates due to no longer being backed by the government poses another challenge. Despite these obstacles, the bulls, like Ackman, remain hopeful that the release could lead to higher returns, and Treasury Secretary Scott Bessent has expressed support for their release from conservatorship, provided it doesn't result in higher mortgage rates.

Ackman believes that President Trump could release Fannie and Freddie from conservatorship through executive orders, though it is unlikely that the Democratic-controlled Congress would allow this without some form of challenge. While investing in Fannie and Freddie is risky, some, like Ackman, believe in the potential payoff and even assign a 10-fold upside from current levels for the common shares.

However, investors should proceed cautiously, given the uncertainties surrounding the release and its potential impact on the mortgage market.