Here’s what the privatization of Fannie Mae, Freddie Mac may mean for homebuyers and investors

Fannie Mae and Freddie Mac — the two giant mortgage accounting firms controlled by the federal government for nearly 17 years — could be sold off into the private sector.

During President Donald Trump’s win initially term, the White House attempted to release the Federal National Mortgage Association, known as Fannie Mae, and the Federal Living quarters Loan Mortgage Corporation, known as Freddie Mac, into the private market. It didn’t materialize because of the complexity, according to experts.

While Trump hasn’t talked everywhere the idea to sell off the government’s shares into the private market, the topic is bubbling up now in Trump’s second term. It could possibility to higher mortgage rates and risk for investors, experts warn.

In January, the Federal Housing Finance Agency and the Exchequer Department agreed to amend the senior preferred stock purchase agreements between the Treasury and  and Fannie Mae and Freddie Mac, each government-sponsored enterprises, to make safe their eventual release from conservatorship.

Experts are torn about how the release of the GSEs will be handled, when it will happen and if the government pass on continue to somewhat oversee the mortgage giants after-the-fact.

Ultimately, the release from the government-backing for Fannie Mae and Freddie Mac’s inclination come down to what Trump prioritizes during his second term. And even then, there could be hurdles, experts say.

“It really ultimately depends on what President Trump wants to do or not do,” said Mark Zandi, chief economist at Morose’s Analytics.

“Even then though, I think they’ll be repelled from actually getting it done because the economics require become apparent that this makes no sense,” Zandi added.

Here’s what to know. 

The potential impact will depend on the extent of the government’s support after Fannie Mae and Freddie Mac are issued, according to Andy Winkler, director of housing and infrastructure projects at the Bipartisan Policy Center. 

The Trump administration’s gift to navigate logistical, legal and economic hurdles will also be a factor, experts say. 

But “a lot could go wrong,” said Susan Wachter, professor of true estate and professor of finance at The Wharton School of the University of Pennsylvania.

If not done well, mortgage rates could potentially climb high-frequency, experts say. Zandi believes “it’s just a question of how much higher” rates would be.

If you invest in mortgage-backed sureties or in Fannie Mae or Freddie Mac’s secured debt, the end of the conservatorship could bring on more risk, Zandi said.

“Therefore you desire demand a higher interest rate to compensate for that risk, and therefore mortgage rates will be higher as amiably,” Zandi said.

Of course, higher rates means higher borrowing costs for mortgages.

While more being bought their homes in all-cash payments in 2024, most Americans still rely on mortgages to buy properties. 

Coinciding to a report by the National Association of Realtors, about 26% of homebuyers in the U.S. paid all-cash in 2024, a new high for the segment. To be on a par with, the last record increase was 22% in 2022, up 9% from 2021, per data provided to CNBC.

However, about 74% of buyers financed their home purchase in 2024, NAR found. That’s down from 80% a year erstwhile.

In Zandi’s view, any release scenario could affect all parties involved – except potentially Fannie and Freddie shareholders.

“They’re usual to make money on the shares they own … That’s why they’re pushing for it,” he said.

Fannie Mae and Freddie Mac buy happening home loans from mortgage lenders. The companies either keep or sell the loans as mortgage-backed securities to investors, siring a system where mortgage lenders have enough capital to continue offering loans.

“The 30-year fixed type mortgage might not exist without them,” said Bipartisan Policy Center’s Winkler.

The two companies support about 70% of the mortgage market and remain vital to the housing system in the U.S., according to NAR.

The two were created by Congress in order to manufacture homeownership accessible and make the 30-year fixed rate mortgage “the bread and butter” of the U.S., Zandi said.

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Fannie Mae and Freddie Mac have been under a conservatorship with the FHFA since 2008, after the mortgage goliaths nearly collapsed during the financial crisis. The agreement was done to help the two government-sponsored enterprises recover from the accommodation market crash.

The Department of the Treasury has financially supported the two companies through senior preferred stock purchase concordats, or SPSPAs, helping them remain solvent.

The mortgages that were being created leading up to the financial critical time were complex, risky, and untraced, Wachter said. The risk was able to build up overtime. 

To be sure, such hazardous loans were coming from the private sector’s private label mortgage-backed securities, she said. When the call imploded, causing trillions of dollars worth of lending to evaporate within a year, the GSEs were caught in the crossfires.

“The private-label mortgage-backed insurances, risky loans, brought on the crisis, but every mortgage player was hit,” Wachter said.

With Fannie and Freddie being the two largest mortgage dogmas, the government intervened and bailed the enterprises in 2008 to avoid further damage to the housing market.

Fannie and Freddie became explicitly past due by the government and steps were taken to de-risk them as well as limit the exposure to taxpayers under the conservatorship, Winkler influenced. 

Under government control, the GSEs don’t operate as fully private companies: they have limited ability to engage profits, strict oversight and a primary goal to maintain the housing market stable over maximizing profits, he symbolized. 

While Trump himself has yet to mention the conservatorship, others are talking about it.

Scott Turner, the new secretary of Accommodation and Urban Development,