In a significant development on May 21, 2025, President Donald Trump announced that he is seriously considering taking Fannie Mae and Freddie Mac public, potentially ending nearly two decades of government control following the 2008 financial crisis. Trump emphasized the strong financial performance of these entities and suggested that the timing might be ideal for privatization.
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Trump’s Proposal to Privatize Fannie Mae and Freddie Mac
President Trump’s proposal to privatize Fannie Mae and Freddie Mac has reignited discussions about the future of these government-sponsored enterprises (GSEs). In a post on Truth Social, Trump stated that he plans to consult with key officials, including Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Federal Housing Finance Agency Director William Pulte, before making a final decision.
The potential privatization could have far-reaching implications for the U.S. housing market. Fannie Mae and Freddie Mac currently support about 70% of U.S. mortgages by buying and securitizing them, which facilitates the offering of more 30-year fixed-rate loans. Critics warn that improper privatization could disrupt mortgage-backed securities markets and lead to increased mortgage rates.
Market Reactions and Potential Impacts
The announcement has led to a surge in investor interest in Fannie Mae and Freddie Mac, driven by expectations of privatization. Shares of Fannie and Freddie have soared 138% and 92%, respectively, this year. However, analysts caution that privatization could lead to higher mortgage rates and increased borrowing costs due to reduced government backing and liquidity. With the current 30-year fixed mortgage rate already at 6.81%, further increases could exacerbate challenges for prospective homebuyers in a high-priced housing market.
Fannie Mae’s Economic Outlook
Amid these developments, Fannie Mae’s Economic and Strategic Research (ESR) Group released its May 2025 Economic and Housing Outlook. The report projects that total single-family home sales will reach 4.92 million units by the end of 2025, with existing home sales making up 4.24 million of those units. The ESR Group’s lower expectations for mortgage rates, now forecasted to end 2025 and 2026 at 6.1% and 5.8%, respectively, contributed to the revisions to the home sales prediction.
Additionally, the report forecasts real gross domestic product (GDP) growth of 0.7% in 2025 and 2.0% in 2026 on a Q4/Q4 basis. Mortgage originations are expected to increase from the previous estimate of $1.98 trillion and $2.33 trillion to $1.99 trillion and $2.38 trillion, respectively, for 2025 and 2026.
Potential Path ForwardThe MortgagePoint -+20AP News+20Fannie Mae+20
The Trump administration is exploring the privatization of Fannie Mae and Freddie Mac, with officials considering an IPO-style offering that could generate up to $30 billion. The potential valuation of the government’s stake in the companies could reach hundreds of billions of dollars.
However, any decision to release the firms will depend on potential impacts on mortgage rates. Treasury Secretary Bessent emphasized that avoiding increased rates is a key factor. The administration is contemplating an executive order to direct agencies to explore this move further.TradingView
Conclusion
President Trump’s consideration to take Fannie Mae and Freddie Mac public marks a significant shift in U.S. housing policy. While the move could potentially reduce the national deficit and return value to taxpayers, it also carries risks that could impact mortgage rates and housing affordability. As the administration consults with key officials and explores the feasibility of privatization, stakeholders across the housing market will be closely monitoring developments.
Stay Informed:
Keep an eye on official announcements and market analyses to understand how these potential changes could affect the housing market and your financial decisions.