Episode summary
Chris Whalen: Fannie & Freddie Stuck, Foreclosures Rising, Credit Problems Coming
The Julia La Roche Show
· · Hosts: Julia La Roche · Guests: Chris Whalen
Summary
Chris Whalen argued that Treasury Secretary Scott Bessent’s public comments on Fannie Mae and Freddie Mac amount to market-moving hype, but not a real roadmap for releasing the GSEs during a Trump term. He said the firms are not prepared to be privatized, the U.S. is effectively the controlling shareholder today, and the cleanest fix would be to buy back public common stock, leave Washington as sole equity owner, and let the public participate through preferred stock and debt.
On housing, Whalen said foreclosure auctions are rising, with Auction.com data showing volume up 25% from a year ago as COVID-era mortgage protections are unwound. He thinks that is part normalization and part a shift toward a buyer’s market as home prices soften. His advice to sellers was blunt: price to sell, especially as higher price points have fewer buyers and longer marketing times.
He also reviewed REIT and mortgage earnings, saying Annaly has managed the rate shock well and is back near book value, while United Wholesale Mortgage is shifting to a more balanced business model. On rates and the Fed, he was less bullish than his friend Ralph on 10-year Treasuries moving meaningfully lower, and he expects the October FOMC to likely pause, though energy and geopolitical shocks could change that. Whalen remained cautious on financials, added to gold on weakness, and kept energy as a key overweight.
Key takeaways
- Whalen said Fannie Mae and Freddie Mac are unlikely to be meaningfully released during Trump’s term because the U.S. still needs to remain the controlling shareholder.
- He suggested a restructuring that buys back public common shares, leaves the U.S. as sole equity owner, and lets investors hold preferred stock and debt instead.
- Auction.com foreclosure volume is up 25% year over year, and Whalen expects foreclosures to keep rising as the housing market normalizes.
- Whalen said Annaly is back near book value and remains attractive to income investors because it can manage higher-rate environments better than typical REITs.
- He is more cautious than his friend Ralph on 10-year Treasuries near 5% and thinks the Fed may pause in October unless energy or war shocks force action.
- Whalen said he is overweight energy, adding to gold on weakness, and wary of financials because credit problems are starting to surface.
Notable quotes
“There isn't really a possibility of release of the GSEs during the Trump term”
“the way you should deal with the GSEs, frankly, is to buy back all of the common shares from the public”
“overall foreclosure auction volume is up 25% from a year ago”
“We are going into a buyer's market as opposed to a seller's market”
“I continue to think credit is going to be a problem going forward”
How the episode opens
There isn't really a possibility of release of the GSEs during the Trump term. What they don't want to mess with is the fact that the United States is the controlling shareholder. Cuz the public doesn't add anything to the credit standing of either of these enterprises. It's only the support of the United States that makes them triple A or double A credits.
Hey everyone, welcome back to another episode of The Wrap with Chris Whalen where we break down what's happening on Wall Street, Washington D.C., and everywhere in between. Chris, great to see you. — Nice to see you, Julia.
So great to see you. We love doing this every single weekend and of course we got to thank our sponsors over at Monetary Metals. You all can head over to monetary-metals.com/thewrap and we appreciate their partnership in making this possible because again, Chris and I love doing this every weekend for you guys and you all have been amazing.
In this week's edition of The Wrap, you wrote that Treasury Secretary Scott Bessent's comments to Mark Halperin you called them a pump and dump. Um and this was around Fannie Mae and Freddie Mac. Do you see any sort of realistic path forward or maybe an ownership restructuring or what that structure change might look like for the GSEs?
Let's talk about the comments and then what do you think is actually realistic here?
Well, I said that because as you know, there are thousands of people out there who own shares in Fannie Mae and Freddie Mac and they're hoping and praying that eventually they get restored to some sort of quasi-private ownership. And every time Bill Pulte, the head of the FHFA, which is the regulator for the GSEs, has commented on this, the stock has surged and then it goes back down.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fannie mae freddie mac
- foreclosure auctions
- housing credit risk
- reit earnings
- fomc rates outlook
Companies and tickers mentioned
- FNMA
- FMCC
- UWMC
- NLY
- Fannie Mae
- Freddie Mac
- Auction.com
- United Wholesale Mortgage
- Annaly Capital Management
Watch the episode
Watch “Chris Whalen: Fannie & Freddie Stuck, Foreclosures Rising, Credit Problems Coming” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from The Julia La Roche Show
-
Larry McDonald: A Lehman-Style Warning, a Fed That Can’t Hike & Gold and Silver Set to Run -
Raoul Pal: The Economy We Know Ends by 2030 — and Why We’ll Never See a Big Recession Again -
Chris Whalen: The GOP’s Extinction Event, Rate Hikes Ahead & Why He’s Buying More Gold -
Henrik Zeberg: Now We Rally — Not Because Things Are Great, But Because Things Are Bad -
Jim Bianco: I Was Bearish on Bonds for 6 Years — Here’s Why I Changed My Mind -
Chris Whalen: Warsh’s Credibility Is Eroding, Private Credit Beats Regulators, Mortgage Pain Ahead
The Julia La Roche Show, this episode and its artwork belong to Julia La Roche. Octagon is not affiliated with the show; this page is an independent summary.
