At least 90%: that is the dilution Michael Burry says Fannie Mae’s common shareholders would face if the Treasury converts its senior preferred stock into common equity. The bottom line for investors is that a stock tied to the biggest balance sheet in American finance is being read as broken on the chart and exposed on the fundamentals.
Burry’s call
Burry, the investor known from “The Big Short,” said in an October 11, 2026 post on X that he had made a move in both Fannie Mae and Freddie Mac. By his account, both stocks have given back essentially all their gains since Donald Trump’s election and have completed a “giant head-and-shoulders-and-elbows top.” “What that chart predicts, technically, is worthless stock,” he wrote. He argued the shares are shedding speculative gains while market attention stays fixed on the AI trade.
The fundamental risk is the Treasury’s senior preferred stock, whose liquidation preference grows every quarter. Citing price action and research from KBW, Burry said Wall Street’s base case is shifting toward a conversion into common equity. Unlocking value, he wrote, would take either an end to government conservatorship or a deep cut to that preference.
The size of the enterprise
Fannie Mae held more than $4.3 trillion in assets as of 2025, the most of any company in the United States and fifth in the world. It also ranks 17th in profit in the US and 32nd globally. Congress created it in 1938 as part of the New Deal, when an estimated 20 to 25% of outstanding mortgage debt was in default and nearly a quarter of homeowners had lost their homes to banks. It buys and securitizes mortgages into mortgage-backed securities, which frees lenders to lend again.
A cooling housing market
Thirty-year mortgage rates reached 7.46% in mid-October, about 0.6 points above where they started September. Broward County, Florida, shows what that does. Total sales fell 9.7% in September, to 1,825 from 2,021 a year earlier. Single-family prices rose 2.39% to a median of $641,500, but condominium medians fell 14.55%, from $275,000 to $235,000.
Fannie Mae and Freddie Mac made condo financing harder. Since August 3, 2026, they have dropped the streamlined review for most condominiums and require a full look at the building’s budget, reserves, insurance and structural documentation. That lands on top of costs that followed the 2021 Champlain Towers South collapse in Surfside, where inspection rules now push many buildings to levy special assessments of $5,000 to $200,000 per unit.
Sources
- Fannie Mae
- Michael Burry Warns Fannie Mae and Freddie Mac Could Become ‘Worthless’ as Trump-Era Gains Collapse Under Fresh Pressure
- The price of condominiums in Broward plummets: The median drops by 14.5%
Photo: Carol M. Highsmith (Public domain)
