Could national housing affordability be at risk as Trump considers privatizing Fannie Mae and Freddie Mac?
At a Glance
- President Trump is eyeing the privatization of Fannie Mae and Freddie Mac.
- This move could lead to higher mortgage rates and affect housing affordability.
- Key Republican allies like Bill Ackman and John Paulson support Trump’s proposal.
- Moody’s predicts increased costs for mortgage borrowers if privatization occurs.
Trump’s Intent on Privatization
President Trump has expressed a keen interest in taking Fannie Mae and Freddie Mac out of government control, a strategic shift after these entities were put under conservatorship post-2008 financial crisis. Trump’s decision, announced on his platform Truth Social, resonates with his administration’s fiscal goals. He’s been quoted saying, “I am giving very serious consideration to bringing Fannie Mae and Freddie Mac public”.
Such a move requires consultation with officials including Treasury Secretary Scott Bessent, Secretary of Commerce Howard Lutnick, and Federal Housing Finance Agency (FHFA) Director William Pulte. Trump is confident in the financial health of the entities, stating they are “throwing off a lot of CASH”.
Potential Repercussions on Housing Market
Privatizing Fannie Mae and Freddie Mac isn’t without its risks. The entities hold a pivotal role in the mortgage market by guaranteeing a significant portion of U.S. mortgages. Economists caution this shift could lead to higher mortgage rates. Moody’s Analytics anticipates a potential annual burden of $1,800 to $2,800 for new borrowers.
“The priority for a Fannie and Freddie release, the most important metric that I’m looking at, is any study or hint that mortgage rates would go up.” – Bessent.
Analysts agree that privatization could generate over $250 billion for the government and wipe $8 trillion in liabilities. However, this may exacerbate the housing affordability crisis. Republican supporters, despite the potential pitfalls, view privatization as a financially sound move for the government to support budget reconciliation bills.
Assessing the Future of U.S. Mortgages
Despite Trump’s strong interest and the backing of influential conservatives, significant due diligence remains. The FHFA and Treasury stress the need for comprehensive studies on the impact privatization could have on mortgage rates, a process that could take years. Analysts do not foresee any major moves before late 2026 or early 2027.
“I think it’s very likely because they need the money.” – Chris Whalen.
At this juncture, the message is loud and clear. While privatization may inject needed funds into the government, it could lead to challenging times ahead for future homeowners. The juxtaposition of potential financial gain against heightened mortgage rates defines this contentious decision.
