Both Fannie and Freddie reported Q1 2026 earnings recently. As usual, headline numbers were astonishing for companies trading over-the-counter. Fannie earned $3.7 billion, Freddie $3.6 billion. Both beat expectations (as usual) and their combined net worth hit $186.6 billion. But investors have been accustomed to strong results for years now. This article is about what is happening behind the scenes. I think a tectonic shift is about to occur and it will put the GSEs on a pathway to exit conservatorship.
Over the last few quarterly updates, a curious re-framing of capital levels has not gone unnoticed. For instance, see the quote below from Freddie Mac CFO Jim Whitlinger’s prepared remarks
"Excluding buffers, our capital shortfall was $105 billion at the end of the first quarter, largely because the $73 billion of Senior Preferred Stock does not qualify as regulatory capital."
Read that again. He is saying that, as a technical matter, if its $73 billion of Senior Preferred Stock (SPS)…
