FNMA

Federal National Mortgage Association / Fannie Mae

$6.99 41B market cap April 15, 2026

Federal National Mortgage Association (Fannie Mae) FNMA BUFFETT / MUNGER / KLARMAN SUMMARY

1 SNAPSHOT

Price$6.99

Market Cap41B

2 BUSINESS

Fannie Mae is one of the most profitable financial institutions in America, earning $14-17B/year from a government-granted duopoly guaranteeing 70% of US residential mortgages. However, this is NOT a traditional investment — it is a binary bet on government policy. Common shareholders sit behind $212B in Treasury senior preferred claims, 79.9% warrant coverage, and $140-215B in recapitalization requirements. Even in the most favorable privatization scenario, dilution of 30-60% is inevitable. At ~$7/share, the stock prices in a >60% probability of favorable privatization — optimistic given 17 years of inaction and the complexity of unwinding the conservatorship. The probability-weighted expected value is ~$5.81, making the current price ~20% expensive. A value investor should WAIT for either a meaningful price decline to $3-4.50 (providing margin of safety for binary outcomes) or irreversible privatization steps that fundamentally de-risk the situation.

3 MOAT Wide (if privatized) / None (under conservatorship for equity holders)

Government-created duopoly guaranteeing ~70% of US mortgages with implicit federal backstop; TBA market liquidity premium; $4.1T book scale; network effects across entire mortgage origination infrastructure

4 MANAGEMENT

CEO: Priscilla Almodovar (CEO since Jan 2023)

N/A — all capital decisions made by FHFA conservator and Treasury

5 ECONOMICS

50% Op Margin

6 VALUATION

DCF Range2 - 15

Probability-weighted expected value: $5.81/share. Current $6.99 is 20% above expected value.

7 MUNGER INVERSION

Kill Event	Severity	P()	E[Loss]
Conservatorship exit uncertainty — binary outcome. 17+ years in government control, no guarantee shareholders ever receive value.	HIGH	-	-
Dilution — Treasury holds warrants for 79.9% of common; recapitalization requires $140-215B in additional capital, meaning massive new share issuance.	MED	-	-

8 KLARMAN LENS

Downside Case

Conservatorship exit uncertainty — binary outcome. 17+ years in government control, no guarantee shareholders ever receive value.

Why Market Right

Administration change in 2028 abandons privatization; Housing downturn increases credit losses, destroys net worth; Treasury reinstates net worth sweep or imposes punitive terms; Congress passes nationalization or wipeout legislation; Multifamily delinquency crisis escalates into material losses

Catalysts

FHFA Director Pulte announces 2.5-5% share sale IPO — validates equity value; Treasury agrees to cancel or convert senior preferred stock at favorable terms; ERCF capital requirements relaxed or 10+ year phase-in announced; Bipartisan Congressional GSE reform legislation introduced; Treasury warrants exercised at known ratio, removing uncertainty

9 VERDICT WAIT

N/A (Conservatorship) Quality Paradox - $109B net worth, $14.4B annual earnings, but $212B Treasury senior preferred claim makes common equity value NEGATIVE under current structure. $22B available capital deficit, $215B risk-based shortfall under ERCF.

Strong Buy$3

Buy$4.5

Fair Value$15

Do not buy at current prices. Set alerts at $4.50 (Accumulate) and $3.00 (Strong Buy). Monitor FHFA/Treasury announcements for privatization catalysts. Maximum 1-2% allocation even at target prices — this is speculation, not investment.

🧠 ULTRATHINK Deep Philosophical Analysis

FNMA — Deep Philosophical Analysis

In the style of Buffett's letters, Munger's wit, and Klarman's margin of safety

The Core Question: Can You Own What the Government Controls?

There is a certain seductive quality to Fannie Mae. Here sits a company that earns $14-17 billion per year — more than Coca-Cola, more than Goldman Sachs, more than all but a handful of enterprises on earth. It operates a duopoly so complete that no competitor could emerge without an act of Congress. Its product — the conforming mortgage guarantee — is woven into the fabric of American homeownership so deeply that unwinding it would shake the foundations of a $50 trillion housing market.

And yet you can buy a share for seven dollars.

The siren song is obvious: if this company were ever freed from its government cage and valued like a normal financial institution at, say, 10x earnings, the equity would be worth $150 billion or more. Even after brutal dilution, the math suggests current shares could be worth $10, $15, perhaps $30. The gap between "what the business earns" and "what you can buy it for" appears almost comically wide.

But the experienced investor pauses here and asks the question that separates speculation from investment: Do I actually own anything?

The honest answer is: not really. You own a piece of paper that represents a residual claim on a government-controlled entity, sitting behind $212 billion in Treasury senior preferred stock, behind 79.9% warrant coverage, behind a conservator with plenary authority to do essentially anything it wants with the enterprise. Under current legal precedent (Collins v. Yellen), FHFA's authority as conservator is nearly absolute. The Supreme Court itself declined to order restitution to shareholders.

What you really own is an option. Not on the business — the business is magnificent. You own an option on a specific sequence of political events: that this administration will negotiate favorable terms with Treasury, that Congress will not intervene adversely, that no housing crisis will derail the process, that the warrants will be exercised or canceled at a ratio that leaves something for you, and that all of this will happen before the political window closes in 2028.

That is a lot of "ifs" for a value investor.

Moat Meditation: The Paradox of the Government Moat

Fannie Mae's moat is perhaps the widest and most durable in all of American finance. The implicit government guarantee allows Fannie MBS to trade at near-Treasury spreads, creating a funding advantage no private institution can match. The To-Be-Announced market — the forward market for agency MBS — is the second most liquid fixed-income market in the world. Every mortgage originator in America is hard-wired into the Fannie/Freddie infrastructure. The network effects are as powerful as Visa's, the switching costs as high as Oracle's, the regulatory barriers as impenetrable as a local utility's.

But here is the paradox Charlie Munger would relish: the very thing that makes the moat wide is the thing that makes the equity dangerous. The government created this moat. The government sustains it. And the government can redirect its benefits to whomever it chooses — taxpayers, homeowners, MBS investors, Treasury itself — without any obligation to common shareholders.

When the government IS the moat, you must ask: whose moat is it? The answer, for 17 years running, has been: not yours.

This is fundamentally different from every other moat analysis in this portfolio. With GOOG, the moat belongs to the business and flows to shareholders through buybacks and dividends. With POOL, the distribution moat generates cash that management allocates to your benefit. With Fannie Mae, the moat is spectacular, the cash generation is prodigious, and precisely none of it reaches your pocket.

The Owner's Mindset: Would Buffett Own This for 20 Years?

Warren Buffett has been clear about his criteria: wonderful business, excellent management, bought at a fair price. He wants to own businesses where the passage of time works in his favor — where each year of patience compounds your wealth.

Fannie Mae fails this test on every dimension that matters for a long-term owner:

Management alignment: The CEO serves at the pleasure of the FHFA Director, who serves at the pleasure of the President. There is no meaningful insider ownership. Management's incentives are political, not economic. This is the antithesis of the owner-operator model.

Capital allocation: All capital allocation decisions are made by FHFA. The company cannot buy back stock, pay dividends, make acquisitions, or even choose its capital structure. It is a ward of the state.

Time as friend or enemy: This is the killer. For most quality businesses, time compounds value. For FNMA, time could compound value (net worth growing at $14B/year) OR time could erode your position (political winds shift, warrants expire, new administration has different priorities). Each passing year without resolution is a year closer to warrant expiration in 2028 — but also a year closer to a potential change in political leadership.

Buffett invested in Goldman Sachs during the crisis — but he got preferred stock with warrants, not common stock behind government claims. The structural lesson is clear: when dealing with government-influenced situations, make sure you are the government, not behind it.

Risk Inversion: What Could Destroy This Position?

Inverting is essential here. The downside scenarios are not theoretical — they are precedented:

Political abandonment: Every administration since 2008 has said they would resolve the GSE question. None has. The Trump administration is further along than any predecessor, but "further along" still means "not done." If privatization is not completed by January 2029, the next administration may have entirely different priorities.
Housing crisis: Fannie Mae survived 2008 only because the government injected $187 billion. A new crisis of that magnitude would destroy the net worth cushion and require additional Treasury draws, diluting or eliminating common equity value.
Punitive recapitalization: Treasury could exercise warrants at full 79.9%, convert senior preferred into a massive common stake, and issue billions in new shares — leaving current common holders with 5-10% of a very large pie. Technically consistent with "privatization" but devastating for current holders.
Congressional intervention: A future Congress could nationalize the GSEs, convert them to a government utility (like Ginnie Mae), or pass reform that explicitly wipes out pre-conservatorship equity. None of these outcomes is far-fetched.
Multifamily contagion: The multifamily delinquency trend approaching housing-bust highs is an underappreciated risk. If commercial real estate stress feeds into Fannie's multifamily book, credit losses could accelerate significantly.

The probability that at least one of these risks materializes over a 5-10 year holding period is not small. And unlike a normal investment where diversification protects you, FNMA is binary — it either works or it does not. There is no "it does okay."

Valuation Philosophy: Price vs. Value in a Political Casino

Seth Klarman wrote in Margin of Safety that the most common investor error is treating speculation as investment. FNMA is the textbook case.

The business itself is worth $150-180 billion as a private enterprise. The common stock is worth somewhere between $0 and $15 per share. That is not a valuation range — it is a confession of ignorance. The difference between zero and fifteen is not driven by any financial metric the investor can analyze. It is driven by the decisions of perhaps three people: the President, the Treasury Secretary, and the FHFA Director.

At $6.99/share, the market is assigning roughly 50-60% probability to a favorable privatization outcome. Is that right? I genuinely do not know. Neither does anyone else. This is not the kind of uncertainty that rewards research — it is the kind that rewards access and influence, neither of which the typical investor possesses.

A value investor's edge comes from understanding businesses better than the market. But the market's pricing of FNMA is not about understanding the business — everyone agrees it is a great business. The pricing is about predicting government behavior, which is a fundamentally different and much less reliable endeavor.

The Patient Investor's Path

The disciplined action is clear: wait.

Not because Fannie Mae is a bad business — it may be one of the best businesses ever created. Not because privatization cannot happen — it very well might. But because the current price offers insufficient compensation for the binary risk profile.

At $3.00-4.50, the asymmetry tilts meaningfully in the investor's favor. At those prices, you are paying for the perpetual conservatorship scenario and getting the privatization option for free. That is margin of safety applied to a special situation.

At $6.99, you are paying for hope and praying the government delivers.

The patient investor sets alerts, monitors political developments, and maintains the discipline to act only when price provides protection against the unknowable. If Fannie Mae is privatized at terms favorable to common shareholders, there will still be ample opportunity to profit on the journey from $4 to $15. You do not need to catch the bottom in a political lottery ticket.

And if it never happens? You will have preserved your capital for opportunities where your analytical edge — not your political forecast — drives returns.

That is the Buffett way. That is the Klarman way. And at $6.99, it means: not yet.

"In the short run, the market is a voting machine, but in the long run it is a weighing machine. The trouble with Fannie Mae is that the government is standing on the scale." — Apocryphal

Executive Summary

Fannie Mae is one of the two Government-Sponsored Enterprises (with Freddie Mac/FMCC) that guarantee roughly 70% of US residential mortgages. It is one of the most profitable financial institutions in the world ($14.4B net income in 2025), yet its common shareholders have received zero dividends since 2008 and face an existential question: will the government ever release this entity from conservatorship, and if so, at what cost to existing shareholders?

This is NOT a traditional value investment. It is a policy-driven special situation with binary outcomes. The analysis below treats it as such.

Phase 1: Risk Assessment (CRITICAL — Binary Outcome)

1.1 Conservatorship Exit Uncertainty (THE Dominant Risk)

Fannie Mae has been in FHFA conservatorship for 17+ years. The fundamental question:

Will common shareholders capture any of the $14-17B/year in earnings?

Current status (April 2026):

FHFA Director Bill Pulte has stated Fannie and Freddie will remain in conservatorship while a 2.5-5% share sale (partial IPO) is prepared
Treasury Secretary Bessent supports eventual full exit but no firm timeline
A decision on the IPO was expected "in the next month or two" as of January 2026
The administration planned to raise ~$30B from an initial stock offering
Congress has NOT passed any GSE reform legislation — all action is administrative

Risk Level: EXTREME. The entire thesis depends on political will that can evaporate with an election, a housing crisis, or a shift in priorities. Every prior administration since 2008 has failed to resolve this.

1.2 Government Policy Risk

Treasury Senior Preferred Stock: $212B liquidation preference (growing). This is SENIOR to all other equity. In a winding-down scenario, common gets zero.
Treasury Warrants: Rights to purchase 79.9% of common stock at nominal price. Warrants expire September 2028. If exercised, massive dilution.
Net Worth Sweep: Modified in 2019-2020 to allow earnings retention. Current net worth: $109B. But the sweep could theoretically be reinstated.
January 2025 PSPA Amendment: Restored Treasury's right to consent to conservatorship release. This gives Treasury a veto over exit timing.
ERCF Capital Requirements: $22B available capital deficit + $215B shortfall to risk-based requirements (including buffers). Full compliance would require $140-215B in additional capital.

1.3 Interest Rate Exposure

Mortgage guarantee business is inherently rate-sensitive
Higher rates reduce origination volumes and new guarantee fee revenue
BUT: existing book reprices slowly (30-year fixed mortgages), providing stable income
Duration gap managed within ~$150B retained portfolio, hedged with derivatives
Fannie Mae forecasts 30-year fixed at 6.1% by end-2026
Risk: A severe rate spike could reduce origination and increase delinquencies simultaneously

1.4 Housing Market Risk

Single-family serious delinquency rate: 0.58% (Nov 2025), still below pre-pandemic 0.65%
Multifamily stress rising: Delinquency approaching housing-bust highs due to rent softness and NOI pressure
Q4 2025: Built single-family loss allowance by $208M; shifted from credit loss benefit (2024) to provision (2025)
Full-year provision swing: ~$1.8B from benefit to provision year-over-year
Average credit scores at origination 22 points higher than 2008; LTV ratios lower
Current credit quality is strong but multifamily is a growing concern

1.5 Dilution Risk (THE Financial Risk)

This is where most FNMA investors get the math wrong:

Share Class	Amount	Impact
Common shares outstanding	5.867 billion	Current float
Treasury warrants (79.9%)	~7.2 billion shares	If exercised, total diluted count becomes ~13B+
Senior Preferred ($212B liquidation pref)	Must be addressed	Cancellation, conversion, or repayment
Junior Preferred ($19B par value)	Potential conversion to common	Additional dilution
New IPO shares	Unknown	$30-143B in new equity needed

Bull case dilution: 30-40% (Treasury negotiates favorable terms, moderate new issuance) Bear case dilution: 60%+ (full warrant exercise + massive new share issuance for recapitalization)

1.6 Legal Risk

Collins v. Yellen (2021): SCOTUS ruled FHFA structure unconstitutional but did NOT order money returned to shareholders. Left remedy to lower courts.
Fairholme Litigation: Jury verdict of $612.4M in damages upheld by federal judge (March 2025). Now at D.C. Circuit Court of Appeals. FHFA defending broad conservator powers.
Preferred shareholder lawsuits: Ongoing but unlikely to fundamentally change outcomes for common shareholders.
Legal resolution is a long game with uncertain payoff.

Phase 2: Financial Analysis

2.1 Income Statement (5-Year History)

Year	Net Income	Notes
2025	$14.4B	Down 15% YoY; provision swing
2024	$17.0B	Strong year
2023	$17.4B	Peak post-crisis earnings
2022	$12.9B	Rate shock year
2021	$22.2B	Refi boom
2020	$11.8B	Pandemic credit provisions
2019	$14.2B	Normalized earnings

Average normalized net income: ~$14-17B/year.

2.2 Revenue Sources

Revenue Component	2025 Approx	% of Total	Trend
Net interest income	~$28-29B	~78%	Stable
Guarantee fee income (within NII)	~$23B	~81% of net rev	Growing slowly
Fair value gains/losses	Volatile	Variable	Down $1.7B in 2025
Fee and other income	~$0.3B	~1%	Growing

Net revenues (2025): $28,964M (down $105M from 2024)

2.3 Key Business Metrics

Metric	Value
Total guaranty book of business	~$4.1 trillion
Single-family conventional book	~$3.6 trillion
Multifamily book	~$521B
Market share: SF mortgage debt	~25%
Market share: MF mortgage debt	~21%
Retained mortgage portfolio	~$134B (capped at $225B)
Avg charged g-fee (SF)	48.5 bps
Avg charged g-fee (MF)	72.4 bps
Avg g-fee on new acquisitions	~58 bps (2025)

2.4 Balance Sheet & Capital Position

Metric	Dec 31, 2025
Net worth	$109.0 billion
Total assets	~$4.35 trillion
Available capital deficit	-$22 billion
Risk-based capital shortfall (incl. buffers)	-$215 billion
Required Tier 1 capital	~$108.75 billion
Total recap needed (est.)	$140-215 billion
Treasury Senior Preferred	$212B liquidation preference
Retained portfolio	~$134B

Book value per share (common): With $109B net worth and 5.867B shares, theoretical book = ~$18.58/share. BUT this ignores the $212B senior preferred. True common equity value under current structure = NEGATIVE. The $109B net worth sits below $212B of senior preferred claims.

2.5 Earnings Quality Assessment

Strengths:

Guarantee fee income is annuity-like, contractual, and highly predictable
$4.1T book churns slowly (average life 7-10 years)
Credit losses historically low on conforming conventional loans
No significant off-balance-sheet surprises (unlike pre-2008)

Weaknesses:

Fair value gains/losses add volatility
Multifamily credit quality deteriorating
All earnings accrue to net worth under conservatorship — shareholders receive nothing
Capital adequacy far from ERCF requirements

Phase 3: Moat Assessment

3.1 Structural Moat: Government Duopoly

Fannie Mae and Freddie Mac together guarantee ~70% of US residential mortgages. This is one of the widest moats in finance — a government-created duopoly with:

Implicit government guarantee: Investors buy Fannie MBS because they believe the US government will stand behind them. This is the REAL moat. It allows Fannie to borrow at near-Treasury rates.
Network effects: Every major mortgage originator uses Fannie/Freddie infrastructure. Switching costs are enormous for the entire housing finance system.
Scale: $4.1 trillion book generates massive data advantages in underwriting, pricing, and risk assessment.
Regulatory moat: Created by Congress (Federal National Mortgage Association Charter Act). No private competitor can replicate without Congressional action.
To-Be-Announced (TBA) market: Fannie MBS are fungible and trade in the TBA forward market — the most liquid fixed-income market after Treasuries. This liquidity premium is irreplaceable.

3.2 Moat Width: WIDE — But Only If Privatized

IF privatized with explicit or implicit government backstop: Moat is WIDE and essentially permanent. The duopoly would have pricing power, scale advantages, and irreplaceable infrastructure.

IF conservatorship continues indefinitely: Common shareholders capture ZERO moat value. The moat exists for MBS investors and homeowners, not equity holders.

IF wound down / nationalized: No moat for equity. Government takes over the function directly.

3.3 Competitive Position

Duopoly partner: Freddie Mac (FMCC) — essentially identical business
Government alternative: Ginnie Mae (FHA/VA loans) — already handles ~30% of market
Private capital: Private-label MBS market exists but tiny (~5% of originations)
No realistic private competitor can emerge without government charter

Phase 4: Privatization Scenario Analysis & Valuation

4.1 Scenario Framework

This is the ONLY way to value FNMA — probability-weighted scenario analysis.

Scenario 1: Full Privatization with Favorable Terms (Bull Case)

Probability: 15%

Assumptions:

Treasury cancels or converts senior preferred at favorable ratio
Warrant exercise at modest dilution (30-40%)
Junior preferred converted to common
IPO raises $30-50B at attractive prices
ERCF capital requirements relaxed or phased in over 10+ years
Explicit government backstop via paid guarantee (like FDIC model)

Valuation:

Normalized earnings: $15B/year
P/E multiple: 10-12x (utility-like, given regulation)
Enterprise value: $150-180B
Less: Treasury claims resolution (-$50B estimated)
Equity to current common: $100-130B
Dilution factor: 0.60-0.70 (30-40% dilution)
Per-share value: $10-15 per current share

Scenario 2: Partial Privatization / Managed IPO (Base Case)

Probability: 35%

Assumptions:

2.5-5% share sale via IPO while remaining in conservatorship
Treasury retains senior preferred and warrants
No immediate resolution of capital structure
Gradual capital build over 5-10 years
Eventual full release after next administration (if favorable)

Valuation:

IPO prices new shares at ~$30-35/share (per CBO/analyst estimates)
But existing common holders are BEHIND Treasury claims
Dilution from new share issuance: 50-60%
Per-share value for current holders: $5-10
Timeline: 3-5 years for full resolution

Scenario 3: Perpetual Conservatorship (Status Quo)

Probability: 35%

Assumptions:

Political will evaporates (election change, housing crisis, other priorities)
Fannie remains in conservatorship indefinitely
Earnings continue accruing to net worth
Treasury warrants expire in 2028 — may or may not be exercised
Common stock trades as perpetual option on political change

Valuation:

Intrinsic value is essentially ZERO (no cash flows to common ever)
Option value: $2-5/share (based on probability of future resolution)
Trading value: Driven by speculation and political news flow
Per-share value: $2-5 (option premium)

Scenario 4: Adverse Resolution / Wipeout (Bear Case)

Probability: 15%

Assumptions:

Congress passes GSE reform that wipes out existing common and preferred
Or: Treasury exercises warrants, converts at punitive ratio
Or: Nationalization / conversion to government utility
Or: New housing crisis destroys net worth, triggering additional Treasury draws

Valuation:

Per-share value: $0-1

4.2 Probability-Weighted Expected Value

Scenario	Probability	Value/Share	Weighted Value
1. Full Privatization (Bull)	15%	$12.50	$1.88
2. Partial Privatization (Base)	35%	$7.50	$2.63
3. Perpetual Conservatorship	35%	$3.50	$1.23
4. Wipeout	15%	$0.50	$0.08
Expected Value	100%		$5.81

Current price: ~$6.99 — trading ABOVE probability-weighted expected value by ~20%

4.3 Sensitivity Analysis

If you assign higher probability to privatization:

Privatization Prob (S1+S2)	Expected Value	vs. Current
30% (conservative)	$4.20	-40%
50% (base)	$5.81	-17%
65% (optimistic)	$7.41	+6%
80% (very bullish)	$9.00	+29%

You need to believe in >60% combined probability of favorable privatization to justify the current price.

4.4 Key Timeline Considerations

Treasury warrants expire September 2028 — a critical deadline
2026 midterm elections could shift political dynamics
2028 presidential election — new administration may abandon privatization
Window of opportunity: 2026-2028 at most under current political alignment
CBO: Under current conditions, GSEs could repay Treasury in 57% of 250 scenarios modeled

Phase 5: Investment Conclusion

What Buffett Would Say

"This isn't an investment — it's a bet on government policy. I'm a businessman, not a lobbyist."

Fannie Mae is a spectacularly profitable business trapped in a political cage. The economics are extraordinary ($14-17B/year in earnings from a government-granted duopoly), but common shareholders have ZERO legal claim to those earnings under conservatorship.

The Core Problem

You are buying a claim on political action, not on cash flows
The government sits senior to you with $212B+ in claims and 79.9% warrant coverage
Even in a favorable scenario, dilution will be significant (30-60%)
The stock already prices in meaningful privatization probability at ~$7
Downside to $0-2 is real if political winds shift

Asymmetry Assessment

Upside: 50-100% in a favorable privatization ($10-15/share)
Downside: 70-100% if conservatorship persists or adverse resolution ($0-2/share)
Risk/reward ratio: ~1:1 at current prices — NOT favorable for value investors
At $3-4/share: Risk/reward improves to ~2:1 or better — that is where this becomes interesting

What Would Make This a Buy

Price drops to $3.00-4.00 (providing adequate margin of safety for binary risk)
Treasury formally announces terms for senior preferred resolution
ERCF requirements formally relaxed or phased timeline published
Bipartisan Congressional support for GSE reform emerges
Treasury warrants exercised at known dilution ratio

Entry Price Targets

Level	Price	Rationale
Strong Buy	$3.00	~50% discount to expected value; adequate margin for binary risk
Accumulate	$4.50	~25% discount to expected value; moderate risk/reward
Current	$6.99	Prices in optimistic privatization scenario; limited margin of safety
Sell/Avoid	>$10	Pricing in best-case privatization at high probability

Verdict

WAIT — Fannie Mae is a fascinating special situation but NOT a value investment at current prices. The stock trades above its probability-weighted expected value, offering a roughly 1:1 risk/reward ratio. A genuine value investor demands a margin of safety, which means waiting for either (a) a price decline to $3.00-4.50, or (b) concrete, irreversible privatization steps that de-risk the binary outcomes.

This is a speculation, not an investment. If you choose to speculate, size accordingly (1-2% of portfolio maximum) and accept the possibility of a total wipe.

Position sizing if purchased: Maximum 1-2% of portfolio. This is NOT a conviction position — it is an option on political outcomes.

Sources: Fannie Mae Q4/FY2025 earnings release, Fannie Mae 10-K (FY2025), FHFA Capital Disclosures (Q4 2025), Congressional Budget Office GSE recapitalization analysis, FHFA guarantee fee reports, Collins v. Yellen court filings, Treasury PSPA amendments.

=== VERDICT: FNMA | WAIT | SB:$3.00 | Acc:$4.50 | Current:$6.99 ===