Trump floats bringing Fannie Mae and Freddie Mac public. Here’s what it could mean to homebuyers and investors.

President Trump made headlines this week with his announcement that he is considering taking home lenders Fannie Mae and Freddie Mac public, effectively ending 17 years of federal control over two key components of the U.S. housing market. This move was met with enthusiasm by Trump ally and prominent Wall Street investor Bill Ackman.

The decision to end the conservatorship of Fannie and Freddie, which together guarantee trillions of dollars worth of mortgages, is a complex and potentially risky endeavor. A previous plan to privatize the two entities during Trump’s first term did not come to fruition, but the president now says he will make a decision “in the near future” on whether to pursue this course of action. The potential privatization is supported by the firms’ return to profitability since their government takeover in 2008.

In a statement on Truth Social, Trump noted that Fannie Mae and Freddie Mac are performing well and generating significant cash flow, indicating that the timing may be right for their privatization. This announcement led to a significant increase in the share prices of both Fannie and Freddie, which are currently traded over the counter.

Advocates for privatizing Fannie and Freddie argue that releasing them from federal control could lead to improved functionality and efficiency. Additionally, some investors who have purchased shares in the firms over the years are hopeful for a federal spinoff that could benefit them financially.

One of the most prominent investors in Fannie and Freddie is Bill Ackman, whose hedge fund Pershing Square Capital Management has held shares in the companies for over a decade. Ackman has been an outspoken proponent of ending the federal conservatorship of Fannie and Freddie, citing potential benefits for taxpayers and the government. Pershing Square is a major private holder of Fannie Mae, with over 115 million shares, and Ackman expressed confidence that Trump would successfully execute the privatization.

Since his reelection, Ackman has actively advocated for the privatization of Fannie and Freddie, estimating that it could generate up to $300 billion for the government. His firm has put together a detailed presentation outlining the potential benefits of this move.

Despite Ackman’s optimism, there are skeptics of the privatization plan, including Democratic Senator Elizabeth Warren, who warned that it could prioritize the interests of investors over the stability of the mortgage market. Warren emphasized the need for a comprehensive plan that considers the potential impact on housing prices and access to homeownership.

The White House has signaled its commitment to evaluating any potential actions related to Fannie Mae and Freddie Mac in a careful and responsible manner. The Federal Housing Finance Agency (FHFA), which oversees the two entities, has not yet provided a response to inquiries about the privatization proposal.

Fannie Mae and Freddie Mac were established by the government in the 20th century to bolster the residential lending system by purchasing mortgages from lenders and packaging them into securities for investors. Following the 2008 financial crisis, the government intervened to save Fannie and Freddie from collapse, placing them under federal conservatorship. Since then, the FHFA has been in charge of overseeing the operations of the two entities. The conservatorship of Fannie Mae and Freddie Mac, which was initially intended to be temporary, has now stretched over a decade. During this time, the two companies have made substantial payments to the government, sparking a debate on whether it is time to end the conservatorship.

Critics of Fannie and Freddie argue that these firms have an unfair advantage in the mortgage industry and believe that their roles should be taken over by the private sector. They view the government’s backing of these entities as distorting the market and potentially leading to another financial crisis. On the other hand, proponents of privatization, such as Ackman, argue that ending the conservatorship could lead to significant gains for taxpayers, especially considering the government’s ownership of almost 80% of both firms’ shares.

However, opponents of privatization warn that ending the conservatorship could result in higher mortgage rates, particularly if Fannie and Freddie lose their perceived government backing. The outcome of the end of conservatorship will largely depend on how the government handles the transition and whether it continues to provide some form of guarantee. Credit agency Fitch Ratings has indicated that it would maintain Fannie and Freddie’s debt ratings similar to U.S. government debt if a federal backstop remains in place.

The possibility of increased mortgage costs is a major concern, especially in a time of rising interest rates. Treasury Secretary Scott Bessent emphasized the importance of considering the impact on long-term mortgage rates when contemplating the release of Fannie and Freddie from conservatorship.

In the past, the Trump administration had proposed ending the conservatorship of Fannie and Freddie, but no concrete steps were taken. Ackman’s Pershing Square outlined a plan to transition Fannie and Freddie into independent publicly traded companies, including holding initial public offerings and gradually selling off the government’s stakes over five years. However, the current administration’s stance on this issue remains uncertain.

FHFA Director William Pulte stressed the need for a careful and thoughtful approach to ending the conservatorship, ensuring the stability of the housing market without causing an increase in mortgage rates. The decision on the future of Fannie and Freddie’s conservatorship will have significant implications for the housing and financial markets, requiring a strategic and well-planned transition process. The sun rose over the horizon, casting a warm glow over the landscape below. As the golden light spread across the fields, the dew-covered grass sparkled like diamonds in the early morning light. Birds began to sing their cheerful songs, welcoming the new day with open wings.

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