Fannie Mae and Freddie Mac, two government-backed mortgage giants, may be privatized under President Donald Trump’s second term, a move that experts warn could drive up mortgage rates. The proposal has gained traction among Trump’s allies, including billionaire investor Bill Ackman, who sees privatization as a way to generate significant profits for the federal government.
If successful, privatization would mark a major milestone for Fannie and Freddie, which were created by Congress to bring liquidity to the secondary mortgage market. However, homebuyers may face higher mortgage rates due to the lack of government guarantee.
Realtor.com Chief Economist Danielle Hale predicts that ending conservatorship could put upward pressure on mortgage rates, as investors would no longer be willing to lend without a government safety net. Mortgage rates have already risen sharply since Trump left office, with rates near 7%.
Housing economist Ken Johnson also warns of potential risks, including the possibility of mismanagement and massive foreclosures if standards become too loose. He suggests that privatization could lead to higher mortgage rates than would be seen otherwise.
The Biden administration has released new guidelines for Fannie and Freddie’s exit from conservatorship, but many experts remain skeptical about Trump’s plans, citing unclear benefits to consumers and the government. Johnson predicts that the new administration will likely delay privatizing the GSEs until mortgage rates fall back to around 4%.
Source: https://www.realtor.com/news/trends/fannie-mae-freddie-mac-privatize-conservatorship-trump