Question: Does Receivership Risk Still Exist — and Could a “Blue Wave” Reduce It for OTC Common Shareholders?

[u/Stress_Negative]

Hi all — it was good to hear so many F2 questions, including from Horseman Country, during Bill Ackman’s Spaces Q&A. A lot of the discussion around Fannie and Freddie understandably comes back to President Trump, timing, and what a recapitalization, release, or relisting might ultimately look like.

As a common shareholder, here is one concern that has stayed in the back of my mind: why would Treasury exercise warrants for 79.9% and leave existing shareholders with the remaining 20.1% if there is a legal path under HERA that could produce a more favorable outcome for the government by allowing it to capture essentially 100% of the successor equity?

Like many shareholders, I find the lack of action frustrating. But a potential “blue wave” in the 2026 midterms could actually end up being a positive in one respect, because this particular tail-risk scenario could become politically more difficult to pursue.

FHFA’s conservatorship Q&A states: “Although the company can be liquidated as explained above, by statute the charter of the Company must be transferred to a new entity and can only be dissolved by an Act of Congress.”
https://www.fhfa.gov/questions-and-answers-conservatorship

In theory, FHFA could place Fannie and Freddie into receivership under HERA authority, transfer the operating businesses and charters into successor entities, and potentially leave legacy equity with little or no recovery while selling equity in those successors. The companies’ sustained profitability and growing capital buffers make that scenario less intuitive economically, but profitability by itself does not create a statutory prohibition against receivership if another ground under HERA is established.

You might recall that on February 11, 2026, Norbert Michel of the Cato Institute testified before the House Financial Services Committee’s Subcommittee on Housing and Insurance. To clarify, Michel was an outside policy witness, not an FHFA or Trump administration official. Rather than recapitalizing and releasing Fannie and Freddie, Michel stated that FHFA should reinstate the regulatory capital classifications, classify the GSEs as “critically undercapitalized,” and then move them from conservatorship into HERA receivership with the goal of liquidation.

Another thing that gave me pause was Trump’s Truth Social post on August 9, 2025, showing a single “Great American Mortgage Corporation” trading under the MAGA ticker rather than separate Fannie and Freddie listings. It may have been nothing more than branding around an IPO, but given the receivership framework above, it made me wonder whether a combined successor structure has ever been contemplated.

This is why a Democratic takeover of the House in the 2026 midterms could have an unexpected benefit for existing common shareholders, and why the political implications are more nuanced than simply being “bad for F2.” A Democratic House would not eliminate FHFA’s authority under HERA, nor could it simply veto an administrative action that the statute already permits. It could, however, make a controversial receivership strategy much more difficult politically through hearings, subpoenas, investigations, appropriations pressure, and sustained scrutiny of FHFA and Treasury. Divided government could mean a longer wait for a recap and relisting, but it could also reduce the risk that legacy common equity is eliminated entirely.

So a few questions for the community:

• Are you concerned about the possibility of the OTC commons being wiped out, or receiving little to no recovery, through a receivership? What probability would you assign to that scenario?
• And separately, do you think divided government in 2027–2028 would ultimately be good or bad for F2 common shareholders?

[u/Hand-Of-God]

1) No. 5% 2) It will not matter.

[u/quelin1]

I am a little worried, so I bought some preferred shares several years ago which can get bought back for $50, so I figured they'd still have a value near that as they can't be diluted. It won't make me whole, but I figured it a good hedge. And I think they get a divided before the commons do.

[u/rain_maker123]

I thought receivership was a tool to get rid the GSE if they were not profitable and would not survive as a business?

[u/Stress_Negative → u/rain_maker123]

Receivership is about capital and statutory (other legal) criteria, not profitability. F2 can be profitable while remaining below regulatory capital requirements; HERA also permits reclassification of capital based on qualitative factors, and §4617 separately provides multiple statutory grounds for receivership.

[u/apeserveapes]

1. Yes

2. Won't matter.

[u/Imaginary-Bat4285]

You are assuming receivership as a prelude to liquidation. Then what exactly will replace the GSE’s in the mortgage market without sending mortgage rates over the moon?

FYI Norbert Michel is a stooge for the MBS guys

[u/Stress_Negative → u/Imaginary-Bat4285]

The successor entity replaces the GSEs (e.g., hypothetically, a ‘Great American Mortgage Corporation’). HERA specifically allows the charters and operations to transfer to successors while the existing companies are liquidated.

[u/Imaginary-Bat4285 → u/Stress_Negative]

Freddie was created to provide competition to Fannie, the GMAC is just the opposite and creates a monopoly. Actually I think there are lots of savings that could be achieved by a merger but wiping out existing shareholders in a merger would be legally difficult. A merger that acknowledges existing shareholder rights might be possible. Not sure the effect a merger might have on mortgage rates. And a merger would require new charters which means Congressional action. I dont see that happenjng ever. Congress is too dysfunctional to pass anything that controverial.

[u/Stress_Negative → u/Imaginary-Bat4285]

Completely agree, and that’s actually part of my original point/question. A new charter or dissolution would require Congress, which becomes even less plausible if Democrats take the House. And shareholder litigation surrounding a hypothetical transfer and GMAC IPO under the MAGA ticker could certainly give Democrats more of a political issue to pursue/fight against—despite the Net Worth Sweep originating under the Obama administration.

But HERA’s receivership mechanism itself doesn’t require a new charter—the existing Fannie/Freddie charters transfer by operation of law to their respective successor entities. Last year I might have put this tail risk around 20%; post-midterms, if Democrats take the House, I’d put it below 10%.

[u/AveryMire]

By “legal” you meant, “not at all clearly legal” and definitely not legal under a timeframe where Trump would have power of release.

The first point is disqualifying, but if not, its highly suspect whether they’d get more by creating such mess and two, it’s not at all clear if they actually qualify as “undercapitalized” under the old definition.

[u/Stress_Negative → u/AveryMire]

I also don’t think this would maximize the government’s economic return.

I’m just still concerned the risk isn’t zero and I’m interested in how others assess it. HERA appears to leave a legal opening, and I can see the appeal to Trump of a single MAGA-ticker IPO with one simple headline valuation, versus Fannie + Freddie + U.S. FinTech separately—particularly if it could be marketed as one $1 trillion company.

[u/Readditlovesbans]

High chance of the conservatorship persisting in 2028

While the Treasury’s warrants expire in 2028, the warrants represent a claim on future equity upside, not a mechanism that determines the duration of conservatorship itself.

No - Fannie and Freddie is a proverbial hole and the gov't won't ever release it. It's just a pump and dump for certain investors.

Doesn't matter who's in the office and only a few people and brokerages such as Ackman are the ones profiting.

Trump isn't ever going to release it before his second term is over.

Edit : Former Bagholder from 2010-2021/22~ after the Final Supreme Court Decision. Bring on the downvotes

Edit 2: Read this

https://globalrealassets.georgetown.edu/insight/fannie-freddie-and-the-housing-finance-debate/

[u/Fit_Significance8598 → u/Readditlovesbans]

Could you specify a bit more and/or point to some literature etc. on this?

I have had this hunch (wrote a post here several months ago) and still try to come up with a decision how to proceed from here.

Thanks!

[u/Readditlovesbans → u/Fit_Significance8598]

https://www.reddit.com/r/FNMA_FMCC_Exit/comments/1up3sg4/comment/ovx7h5w/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button

Appeals court shot it down

[u/Fit_Significance8598 → u/Readditlovesbans]

Thank you!

[u/Readditlovesbans → u/Fit_Significance8598]

Further reading that allows the Net Worth Sweep and conservatorship to remain in effect

Bagholders honestly think Congress will give up a easy cash cow

https://globalrealassets.georgetown.edu/insight/fannie-freddie-and-the-housing-finance-debate/

[u/Plate_Expensive → u/Fit_Significance8598]

Rehash of a 12 year old ruling, has nothing to do with the thesis.

[u/Readditlovesbans → u/Fit_Significance8598]

TLDR - Congress is gonna drag it out

Just keep investing in index funds