President Trump has announced plans to consider taking government-sponsored enterprises Fannie Mae and Freddie Mac public, potentially ending their current conservatorship arrangement. The move could provide a windfall to taxpayers, but it also raises concerns about the impact on mortgage rates.
Fannie Mae and Freddie Mac were created in the 20th century to bring more money into the nation’s residential lending system, making it easier for average families to buy a home. However, after a mortgage crisis sparked the 2008 recession, they were put under federal conservatorship to save them from collapse. The arrangement has lasted for over a decade, with the two companies making billions in payments to the government.
Some critics view Fannie and Freddie as unfairly dominant in the mortgage industry and believe they should be played by the private sector. However, opponents argue that privatization could push up mortgage rates, especially if the firms are no longer viewed as backstopped by the government.
The risk of higher mortgage costs is a major concern, particularly with elevated interest rates already affecting the economy. Treasury Secretary Scott Bessent has warned that any changes to Fannie and Freddie must be done carefully to avoid immediate price hikes at mortgage lenders.
Analysts predict that the Trump administration may take a slower approach to addressing Fannie and Freddie, following their recent moves on trade tariffs. The proposed public offering could be held as early as 2026 for Fannie and 2027 for Freddie, but it’s unclear how or if the administration will pursue this idea.
Experts warn that any end to government control of Fannie and Freddie needs to be carefully planned to ensure the safety and soundness of the housing market without upward pressure on mortgage rates. The FHFA Director has emphasized the need for an “extremely thoughtful” approach to exit the conservatorship arrangement.
The outcome of this proposal is uncertain, but it highlights the ongoing debate about the role of Fannie Mae and Freddie Mac in the mortgage industry and their potential impact on consumers.
Source: https://www.cbsnews.com/news/trump-fannie-mae-freddie-mac-what-to-know