Michael Burry, the investor identified as the "Big Short" prototype, released a
detailed analysis saying President Trump’s decision on whether the U.S. Treasury
will forgive roughly $193bn in nominal obligations of Fannie Mae and Freddie Mac
could trigger a new U.S. housing crisis. Both government-supported GSEs
guarantee the vast majority of U.S. mortgages. Burry says debt forgiveness would
likely lift the firms’ shares 3–4x immediately and 6–7x over the long run;
without forgiveness he warns shares could drop to single-digit levels. From SEC
filings he cites rising credit stress at Fannie: bad-loan charge-offs rose from
$61m to $243m YoY, and its largest mortgage partner was forced to repurchase
$221.6m of fraudulent loans.
