President Trump's claim on June 5 that Fannie Mae and Freddie Mac could be worth a combined $1 trillion ignited a brief rally in their shares before reality set in.
Shares of Fannie Mae (FNMA) jumped 10% in early trading, with Freddie Mac (FMCC) rising 9.7%. However, those gains mostly evaporated by midday as analysts focused on the numbers.
Wall Street's consensus fair value for the two mortgage giants is between $200 billion and $250 billion. Their combined net worth as of March 31 stands at just $186.7 billion. Trump's estimate represents a roughly 5x premium.
Both GSEs have been under government conservatorship since 2008. The administration is exploring privatization, including a $200 billion mortgage-backed securities purchase mandate. It has also directed Fannie and Freddie to consider crypto assets in mortgage risk assessments, potentially opening a new market for borrowers with digital wealth.
For investors, the gap between Trump's estimate and reality is stark. The ceiling depends on privatization terms that remain highly uncertain. The crypto mortgage initiative adds further regulatory complexity to an already convoluted situation.