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QS Research · Michael Burry's Scion Capital analyst template · 2006

FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE (FNMA)

As of 2026-11-02 · 10/15 boxes filled from SEC filings and market data

Conclusion: WATCH

Conviction low · base case +25% · downside 0% · upside +73%

FNMA common looks optically cheap at 4.8x TTM P/E and 0.05x book, but the common only earns $1.25B of the $15.41B total net income because $14.15B goes to preferred/other claims. Even using a 6.0x multiple (a 25% discount to the weakest peer P/E of 8.3x because comparability is weak) on $1.25B yields $7.5B, only +24.6% from today's $6.02B market cap, so the base case fails the +30% long threshold. Downside at the current 4.8x multiple is roughly the current price (-0.3%), and upside at 8.3x is +73%, so the risk/reward is asymmetric but not yet compelling enough for a long. I would wait for a clearer catalyst on conservatorship exit or capital relief.

Key numbers

The 15 boxes

  1. ✓ 1. Long-form business notes

    Fannie Mae is a government-sponsored, stockholder-owned corporation that provides liquidity to the U.S. residential mortgage market by buying loans from lenders, securitizing them into guaranteed MBS, and earning guaranty fees as its primary revenue. It operates Single-Family and Multifamily segments, has been in conservatorship since 2008, and faces significant Treasury senior preferred stock obligations and regulatory capital shortfalls. Between FY2020 and FY2025, net worth grew from $25.3 billion to $109.0 billion, while the core business model remained unchanged.

  2. ✓ 2. Competitive advantage

    Fannie Mae's competitive position rests on its GSE charter and status as the largest guarantor of U.S. residential mortgage debt (24% share as of Sep 30, 2025), giving it scale in securitization and a durable role in mortgage markets. However, its advantage is heavily constrained by conservatorship, a $22B regulatory capital deficit, higher capital requirements than its primary competitor, and limits on pricing and diversification. Return on regulatory capital is insufficient to attract private investors, and talent retention is disadvantaged. Pre-tax earnings are substantial but reported net income is minimal, reflecting the current ownership and capital structure.

  3. ✓ 3. 10-Q takeaways

    Fannie Mae's Q3 2026 net income rose to $4.18B, helped by net revenue and fair value gains but partly offset by a jump in credit provisions to $1.14B. Net interest margin improved to 0.70%, and nine-month net worth reached $119.6B. Mortgage rates rose to 7.03%, and management sees 2.7% home price growth for 2026. A new executive order on housing costs adds regulatory risk.

  4. ○ 4. Corporate governance
  5. ✓ 5. Overview of the prior 3 years of 8-K filings
  6. ○ 6. Other significant filings
  7. ✓ 7. Chronology of significant news and events
  8. ✓ 8. Comparables valuation interpretation
  9. ✓ 9. Insider trading interpretation
  10. ○ 10. Earnings-call notes
  11. ○ 11. Impression of the shareholder letter
  12. ○ 12. Scuttlebutt overview
  13. ✓ 13. Valuation and risk/reward summary
  14. ✓ 14. Current price suppression and potential catalysts

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