Michael Burry Says Recent Court Win and Upcoming Ownership Review Signal Good News for Fannie Mae and Freddie Mac

When Michael Burry, the hedge‑funder famous for "The Big Short," took to the airwaves on Tuesday, he didn’t just riff on the latest market chatter. He zeroed in on two very concrete developments that, in his view, could turn the tide for the government‑sponsored enterprises that dominate America’s mortgage market.

First, a July decision by the U.S. Court of Appeals for the D.C. Circuit. The court upheld an $812 million judgment – plus interest – against the Federal Housing Finance Agency, confirming a jury’s finding that the 2012 “net‑worth sweep” of Fannie Mae and Freddie Mac earnings violated shareholder rights. In plain English, shareholders won a big payday, and the appellate panel refused the agency’s bid for a rehearing, leaving the ruling firmly in place.

Second, Treasury Secretary Scott Bessent, speaking to 2WAY media, hinted that the administration plans to revisit the ownership structure of the two GSEs either next year or the year after. His caveat? Any move must keep the spread between agency mortgage rates and Treasury yields from widening – a subtle way of saying, “we don’t want home‑buyers paying more because of policy fiddling.”

Those two nuggets of news were enough to light a fire under the stocks. Fannie Mae surged roughly 9 percent, while Freddie Mac jumped about 8 percent on the day. Traders on Stocktwits were flagging “extremely bullish” sentiment, and the message boards were buzzing with speculation.

It’s worth noting that Burry’s own position has shifted. Earlier in the month he sold his common shares of both firms – after a head‑and‑shoulders pattern made the stocks look, in his words, “worthless.” At the same time he piled into junior preferred shares, which sit higher in the capital stack and, he argues, would be safer if the Treasury eventually converts its $388 billion senior preferred claim into common equity – a move that could dilute existing common shareholders by as much as 90 percent.

Fannie and Freddie have been under government conservatorship since the 2008 financial crisis, and the lingering uncertainty about their ultimate fate has kept investors on edge. Burry’s optimism, however, suggests he sees the recent court win and the upcoming ownership review as concrete steps toward a more predictable future for the GSEs.

Whether the market’s rally sticks around will depend on how quickly Washington can sort out the ownership puzzle without pushing mortgage spreads higher. For now, though, the combination of a court victory and a hint of policy clarity has given the two mortgage giants a much‑needed boost.