When the cheerleader puts down the pom-poms, pay attention. The Fannie Mae and Freddie Mac downgrade just landed, and it comes from one of the stocks’ loudest boosters. Mizuho analyst Dan Dolev cut both companies to Neutral from Buy on Monday, saying the odds of a privatization by 2028 are fading, according to Seeking Alpha.
That’s a notable reversal. Dolev started coverage of both stocks with a Buy rating in May, and he is now walking it back.
What the Fannie Mae and Freddie Mac downgrade changed
The core of the call is simple. Mizuho now sees a release from government control as further away than it did five months ago. So the bank pulled its bullish rating on both companies.
The numbers moved too. StreetInsider lists Mizuho’s Fannie Mae price target at $5, cut in half from $10. I could not confirm a new target for Freddie Mac. In May, Mizuho had pegged Freddie at $9, National Mortgage News reported.
Back then, Dolev’s base case gave Fannie a 30% chance of exiting conservatorship by 2028, and Freddie 20%, per Bloomberg. Those odds now look too generous to him.
Three headwinds behind the Fannie and Freddie downgrade
So what changed? GuruFocus lists three problems behind the Mizuho downgrade.
- Rising mortgage rates that could force the companies to raise guarantee fees, the charges they collect for backing loans.
- The Federal Housing Finance Agency’s strategic emphasis on mortgage acquisition.
- The return of VantageScore alongside FICO in credit-score policy.
Dolev reportedly expects the first to create political complications for a privatization. He expects the other two to slow how fast the companies can build capital. Both stand in the way of an exit.
The agency’s push to buy loans is nothing new, as our look at how Fannie and Freddie are buying billions in mortgages shows.
A growing chorus of doubters
Mizuho is hardly alone, and the GSE downgrade wave is building. BTIG also cut both stocks to Neutral, citing limited visibility on timing. KBW slashed its Fannie target to $3.50 last month, and the stock fell 8.6% to $4.27 that day.
September was already brutal. Fannie dropped more than 23% and Freddie more than 25%. Michael Burry has gone further, warning the shares could become worthless. That is his opinion, not a forecast anyone can verify.
I could not find today’s price reaction, so I won’t guess at it.
Why the Fannie Mae and Freddie Mac downgrade matters beyond the tickers
Here’s the thing: this isn’t only a Wall Street spat. Both companies have sat in federal conservatorship since 2008, and they back a huge share of American home loans. Higher guarantee fees can feed into what borrowers pay.
The rate fight is not abstract for anyone shopping for a mortgage, especially with rates already at their highest level since 2023.
Meanwhile, no one has set a date for the next move. I found no new statement from the FHFA or Treasury on this Fannie Freddie rating cut, nor any scheduled catalyst on conservatorship exit, fees or credit scores. For now, the market is pricing in a very long wait.
So here’s the question hanging over the tape: if even the bulls have stopped believing in 2028, what is anyone paying for? That is the real message of the Fannie Mae and Freddie Mac downgrade.
