Fannie Mac and Freddie Mac, two pillars of the U.S. mortgage market, are currently controlled by the federal government. Some in Washington, D.C. expect President Trump to push their protection to end.
“We have a mortgage financing system that is very effective in the upward velocity, but are we ready for a downturn?” from 2019 to 2021, Mark Calabria, a former director of the federal housing finance institution, said: “Although I’m optimistic about the overall economic situation, but are we putting taxpayers at risk? ”
Minnie May and Freddy McKe Create financial products that support the mortgage market and reduce investor risks. These products may affect mortgage rates in the United States
With the global financial crisis, the two companies were included in government protection in September 2008. Afterwards, many borrowers defaulted on mortgage loans and risked losing their homes. Between 2007 and 2010 3.8 million homes foreclosed According to estimates from the Federal Reserve Bank of Chicago.
At that time, the Treasury extended $100 billion lender to Minnie and Freddy to make them float. The Treasury also initiated their profits to get the taxpayer’s bail back.
“It seems to me that’s a good decision,” said Moody’s economist Mark Zandi.
In the following years, Minnie and Freddy paid $3001 billion to the Treasury. As the process unfolds, the value of Minnie and Freddy’s stocks is basically nothing.
Fannie Mae and Freddie Mac’s stock performance in the S&P 500 from 1980 to 2025. Share prices of the two mortgage market companies fell sharply when they entered government custody services in 2008.
In 2019, the government ended Fannie and Freddie’s profits, laying the foundation for the two mortgage giants to return to the private market.
Calabria said: “The first limitation to us is the lack of capital. Menie and Freddie’s leverage was about 1,000-1, which means they There is almost no capital.”
Today, both companies are called government-funded businesses or GSEs. Fannie Mae was leased as a government agency in 1938 and became a private entity in 1968. Freddie Mac was founded as a private company by the Congress Act in 1970.
Mark Zandi estimates that mortgage rates could rise by 60 to 90 basis points without the support of explicit or implicit government mortgage giants. Proponents of privatization like Calabria say it won’t raise interest rates and can even disappoint them.
Watch the video above to see how Fannie Mae and Freddy’s protection affects home purchases in the United States
