People walked on July 14, 2008 next to McLean, Virginia for the sign of Freddie Mac’s headquarters. AFP Photo/Paul J. Richards
Paul J. Richards | AFP | Getty Images
Fannie Mae and Freddie Mac – two giant mortgage financing companies that have been controlled by the federal government for nearly 17 years, can be sold to the private sector.
During President Donald Trump’s first term, the White House tried to release the federal National Mortgage Association and the Federal Home Loan Mortgage Company (known as the Freddie Mac) to the private market. Experts say it has not been implemented due to complexity.
While Trump hasn’t talked about the idea of selling government stocks to private markets, the topic is bubbling during Trump’s second term. Experts warn that this could lead to higher mortgage rates and risks for investors.
In JanuaryThe Federal Housing Finance Agency and the Treasury Department agreed to amend the senior preferred stock purchase agreement between the Treasury, as well as Fannie Mac and Freddie Mac for each government-funded business to ensure that it ultimately comes from protection measures release.
What problems do we want to solve?
Mark Zandi
Chief Economist at Moody’s Analysis
Experts are on how to deal with the release of GSE, when it will happen, and whether the government will continue to monitor the mortgage giants afterwards.
Ultimately, the release from the administration’s support for Fannie Mae and Freddie Mack will come down to Trump’s priority in his second term. Experts say even that, there may be disadvantages.
“It ultimately depends on what President Trump wants to do,” said Mark Zandi, chief economist at Moody Analytics.
Zandi added: “Even then, I think they will be beaten back because economics will become obviously meaningless,”
This is something to know.
What may be a release mean for home buyers, investors
Andy Winkler, director of Housing and Infrastructure Programs at the Both Policy Center, said the potential impact will depend on government support after the release of Fannie Mae and Freddie Mac. degree.
Experts say the Trump administration’s ability to logistical, legal and economic barriers will also be a factor.
But, “A lot can go wrong,” said Susan Wachter, a real estate professor and finance professor at the University of Pennsylvania’s Wharton School.
Experts say mortgage rates may climb higher if they are not done well. Zandi believes that “it’s just a matter of how much higher it is.”
A deal, this is not a signature, this is not something you can do.
Susan Wachter
Professor of Real Estate and Professor of Finance, Wharton, University of Pennsylvania
Zandi said that if you invest in mortgage-backed securities or secured debts from Fannie Mae or Freddie Mac, the end of the Protection Agency could bring more risks.
“So you’re going to ask for higher rates to cover this risk, so mortgage rates will be higher, too,” Zandi said.
Of course, higher rates mean higher borrowing costs for mortgage loans.
While more and more people buy homes in all-cash payments in 2024, most Americans still rely on mortgages to buy properties.
according to Report By the National Association of Realtors, about 26% of home buyers in the U.S. paid all-cash in 2024, a new high for the segment. For comparison, the last record in 2022 grew by 22%, up 9% from 2021, according to data provided to CNBC.
However, NAR offers about 74% of buyers for their home purchases in 2024. This is down from 80% a year ago.
Zandi believes that any release plan may affect all relevant parties – except that it may be shareholders of Fannie Mae and Freddie Mae.
“They will make money on the stocks they own … that’s why they work hard for it,” he said.
Why Fannie Mae and Freddie Mae are essential
Fannie Mae and Freddie Mac buy existing home loans from mortgage lenders. Both companies either save or sell loans as mortgage-backed securities to investors, creating a system where the mortgage lender has enough funds to continue providing the loan.
“30 Year Fixed Rate Mortgage Probably not present Without them.
Both companies support 70% of the mortgage market, which is crucial to the U.S. housing system, according to This is NAR.
Zandi said the two were created by Congress to give homes access and to make the U.S. 30-year fixed-rate mortgage “The Bread and Butter.”
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Fannie Mae and Freddie Mac Protection behavior With FHFA Since 2008The mortgage giant almost collapsed during the financial crisis. The agreement aims to help two government-funded businesses recover from the collapse of the housing market.
The Ministry of Finance has financially supported both companies through the Senior Preferred Stock Purchase Agreement (SPSPA) to help them stay solvency.
Wachter said mortgages caused by the financial crisis are complex, risky and untracked. Risk is able to work overtime.
She said it is certain that the risk of this kind of loan comes from private sector mortgage-backed securities. GSE was caught when the market collapsed, causing trillions of dollars to evaporate within a year.
“Private label mortgage-backed securities, risky loans bring crisis, but every mortgage player is hit,” Waht said.
Since Fannie and Freddie are the two largest mortgage agencies, the government intervened and bailed the business in 2008 to avoid further damage to the housing market.
Wenkler said Minnie and Freddy had clear government support and took steps to reduce risks and limit exposure to taxpayers under protection rule.
Under government control, GSEs do not operate as fully private companies: their ability to retain profits, strict oversight and main goals is limited to maintaining the housing market rather than maximizing profits.
What is the probability of the system ending?
While Trump himself hasn’t mentioned protection, others are talking about it.
Minister of Housing and Urban Development Scott Turner, Mentioned In a February 5 interview with the Wall Street Journal, the magazine’s efforts to free Fannie and Freddie would be a priority.
Pershing Square CEO Bill Ackman Posted on X In December, “Miney and Freddy’s success should bring $300 billion in additional profits to the government,” while removing about $8 trillion in debt from the government’s balance sheet.
Even if the government prioritizes protection measures, the process itself can be taken Completed in years, Experts say.
“It’s not an agreement, it’s not a signature,” Vochter said. The process involves multiple political parties, including the Ministry of Finance, the Ministry of Justice, the FHFA and shareholders in the private sector.
But if “economics based on all this, there should be no chance of administrative release.” “This has no economic significance.”
“The release is taxpayers, home buyers, housing market, economy, everyone is worse than the status quo,” Zandi said. “What problem do we want to solve?”
