People go a sign for Freddie Mac headquarters on July 14, 2008 in McLean, Virginia. AFP Photo/Paul J. Richards (photo loan should read Paul J. Richards/AFP about Getty Images)
Paul J. Richards | AFP | Getty pictures
Fannie Mae and Freddie Mac – the two giant mortgage financing companies that have been controlled by the federal government for almost 17 years – were sold to the private sector.
During the first term of office of President Donald Trump, the White House, the Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, known as Freddie Mac, tried the private market. According to experts, it was not possible due to the complexity.
While Trump did not talk about the idea of selling the government's shares in the private market, the topic is now bubbling in Trump's second term. Experts warn.
In January, the Federal Housing Finance Agency and the finance department agreed to change the high -ranking preferred shares between the Ministry of Finance and Fannie Mae and Freddie Mac, each sponsored by the government to ensure its final release from the conservatory.
What problem do we try to fix?
Mark Zandi
Chief economist at Moody's Analytics
Experts are torn about how the publication of the GSEs is treated when it will happen and whether the government will continue to monitor the mortgage giants after the facts.
Ultimately, Fannie Mae and Freddie Mac's government will be published on what Trump prioritizes during his second term. And even then there could be disadvantages, experts say.
“It really depends on what President Trump wants to do or not,” said Mark Zandi, chief economist at Moody's Analytics.
“Even then, I think they will be rejected because they actually do it because the economy becomes clear that this makes no sense,” added Zandi.
Here is what to know.
What the publication could mean for buyers, investors
According to Andy Winkler, director of housing and infrastructure projects at the cross -party policy center, the potential effects of the government support after Fannie Mae and Freddie Mac have been released.
The ability of Trump management to control logistical, legal and economic hurdles will also be a factor, say experts.
But “go wrong,” said Susan Wachter, professor of real estate and professor of finances at the Wharton School of the University of Pennsylvania.
If not well done, the mortgage interests could possibly rise higher, experts say. Zandi believes that “it is only a question of how much higher interest rates would be.
It is not something that you can do with a signature on an agreement.
Susan Wachter
Professor of real estate and professor of finance at the Wharton School of the University of Pennsylvania
If you invest in mortgage securities or in Fannie Mae or in the secured debts of Freddie Mac, the end of the conservatory could bring more risk, said Zandi.
“Therefore, you will request a higher interest rate to compensate for this risk, and therefore the mortgage interest will also be higher,” said Zandi.
Of course, higher interest rates means higher credit costs for mortgages.
While more people bought their houses in all-cash payments in 2024, most Americans still rely on mortgages to buy real estate.
According to a report by the National Association of Realors, around 26% of the buyers in the United States paid allcash in 2024, a new maximum report for the segment. In order to compare, the last record increase in 2022 was 22%, an increase of 9% compared to 2021 in accordance with data made available to CNBC.
However, around 74% of buyers financed their home purchase in 2024, Nar said. That dropped after 80% per year earlier.
According to Zandis, each publication scenario could influence all parties involved – with the exception of potentially fannie and freddie shareholders.
“You will earn money with the shares you own … So you push it afterwards,” he said.
Why Fannie Mae and Freddie Mac are essential
Fannie Mae and Freddie Mac Buy existing housing loans from mortgages. Companies keep or sell the loans to investors either as mortgage securities and create a system in which mortgageers have sufficient capital to continue to offer loans.
“Without them, the 30-year-old mortgage could not exist for fixed interest rates,” said Winkler of the non-partisan policy center.
According to NAR, the two companies support around 70% of the mortgage market and remain of crucial importance for the housing system in the USA.
The two were created by the congress to make home ownership and to make the 30-year-old mortgage with a fixed interest rate “bread and butter” from the USA, said Zandi.
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Fannie Mae and Freddie Mac have been conservatory with the FHFA since 2008 after the mortgage giants had almost collapsed during the financial crisis. The agreement was carried out to help the two companies funded by the government to recover from the crash for real estate market.
The Ministry of Finance has financially supported the two companies with high -ranking preferred shares or SPPAs to help them remain solvent.
The mortgages that were created before the financial crisis were complex, risky and not persecuted, said Wachter. The risk could build overtime.
Of course, such risky loans came from the private mortgage paper of the private sector, she said. When the market imploded and trillion dollars that evaporated loans with the value of within one year were caught in the crossfires.
“The private label mortgage securities, risky loans, raised the crisis, but every mortgage player was hit,” said Wachter.
Since Fannie and Freddie are the two largest mortgage institutions, the government intervened in 2008 to avoid further damage to the real estate market.
Fannie and Freddie were expressly supported by the government and steps were taken to determine them and to limit the commitment to taxpayers as part of the conservatory, said Winkler.
The GSES are not working as a completely private company under the control of the government: they can only maintain limited profits, strict supervision and the main goal for the stable real estate market by maximizing profits, he said.
What are the probability of the conservatory?
While Trump has not yet mentioned the conservatory, others talk about it.
Scott Turner, the new secretary for housing and urban development, mentioned in an interview published on February 5 with Wall Street Journal that the effort to publish Fannie and Freddie would primarily be made.
Bill Ackman, CEO of Pershing Square, released in December on X that “a successful creation of Fannie and Freddie should achieve additional profits of 300 billion US dollars for the government”, while about 8 trillion US dollars of liabilities be removed from the government's balance sheet.
Even if the administration prioritizes the conservatories, the process itself could take years, according to experts.
“It is nothing you can do with a signature with an agreement,” said Wachter. The process includes several parties, including the Ministry of Finance, the Ministry of Justice, the FHFA and the shareholders of the private sector.
If “based on the economy of everything, there should be no chance that they will be released administratively,” said Zandi. “It doesn't make an economic sense.”
“A publication is a loss for taxpayers, home buyers, the real estate market, the economy, everyone is worse than the status quo.” Said Zandi. “What problem do we try to fix?”