Burry's Big Bet on Fannie and Freddie

Michael Burry, the investor who made a name for himself by predicting the 2008 housing market crash, is now betting big on Fannie Mae and Freddie Mac. He thinks these two companies could see a significant rise in value if they go public again. In a recent post on his Substack newsletter, Burry shared his thoughts on the potential IPOs of Fannie and Freddie. He believes that the IPO price could be between 1 and 1. 25 times the book value of these companies. After going public, he expects the shares to trade at 1. 5 to 2 times the book value within one to two years. Burry is not alone in his interest in these companies. Berkshire Hathaway, the investment firm led by Warren Buffett, has also invested in mortgage-related companies in the past. However, it's important to note that Berkshire once held a stake in Fannie Mae but later sold it. Fannie Mae and Freddie Mac play a crucial role in the U. S. housing market. They own or guarantee about 62% of outstanding U. S. mortgages and support around 70% of conforming bank loans. This means they are a big deal in the world of home financing. The Trump administration had previously considered launching IPOs for these two companies. However, this plan has not yet materialized. Fannie and Freddie were created by Congress to make sure there is affordable mortgage financing available. But they took a big hit during the 2008 financial crisis and have been under federal conservatorship ever since. These companies work by buying mortgages from lenders. They either keep these mortgages in their portfolios or bundle them into mortgage-backed securities for sale. This process helps to keep mortgage credit flowing to homebuyers and investors in multifamily properties.