The fate of the government-sponsored enterprises remains unclear – but ending their conservatorship is likely to be a lengthy battle
The Trump administration has continued its dramatic rollback of federal government agencies and programs this week, reshaping the regulatory landscape with actions including a freeze on all rulemaking at the top federal consumer finance watchdog.
But there’s still been precious little indication of its plans for Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) whose release from conservatorship was thought to be a key pillar of Republican housing policy under the new president.
Observers including investor Bill Ackman view a “credible path” to that outcome, and a potential Fannie-Freddie public offering next year.
The nomination of Bill Pulte to helm the Federal Housing Finance Agency (FHFA), which oversees both entities, was viewed as a step toward a possible end to government conservatorship and welcomed by the Mortgage Bankers Association (MBA) as a move in that direction.
“The conservatorship of Fannie Mae and Freddie Mac was never intended to be permanent,” MBA president and chief executive officer Bob Broeksmit said after Pulte’s appointment, and said the association was “ready to work with the administration and Congress to ensure that the transition to a post-conservatorship era for the GSEs is done the right way.”
Still, ending the policy appears to have taken a back seat – for now – to other priorities as Elon Musk’s Department of Government Efficiency (DOGE) takes an ax to federal agencies.
Ending Fannie and Freddie’s conservatorship no easy feat
Of course, removing Fannie and Freddie from majority government control can’t be done at the drop of the hat, and lawmakers are likely taking a longer-term approach to that issue with plenty still to be determined about how it would be achieved, according to Better.com chief financial officer Kevin Ryan (pictured top).
He told Mortgage Professional America he wasn’t surprised by the fact that there has been so little mention of Fannie and Freddie by government officials in the first two weeks of the new Trump presidency.
Mat Ishbia shares the positive outlook for the mortgage industry under Trump’s new administration. He highlights the importance of innovation and aligning Fannie and Freddie with the industry's mission to make homes affordable for all.https://t.co/pgqI4oJuA8
— Mortgage Professional America Magazine (@MPAMagazineUS) February 5, 2025
“It’s complicated,” he said. “In order to get GSE privatization done, you’re going to have to have a real sit-down on what the right G [guarantee] fees are, what the right percentage of bond holdings is that they’re supposed to have within the enterprise, whether they can generate enough of a return to attractive private capital… the things that have been worked on in the past and thought about, but they need to be dusted off.”
Issues to be ironed out, he added, include tweaking the GSEs’ business models to generate enough returns to raise the capital they need, a less straightforward task than freezing spending at specific departments or signing executive orders.
That’s for the best, according to Ryan, with as comprehensive and well-planned a policy as possible necessary to make the process a smooth one.
“Presumably there’s work going on in the background here but unless you just want to get out there with something that’s half-baked at best, you’re going to have to do a little work,” he said. “It’s doable, but complicated.”
What would it take to end conservatorship?
Meeting those capital adequacy standards would be a key step in ending the government’s stewardship of Fannie and Freddie, meaning they can operate independently without federal support.
That might be achieved by changing preferred stock purchase agreements (PSPAs), which were signed with the US Treasury in 2008, to allow them to retain a higher share of their profits or through the issue of new stock in an independent public offering (IPO).
The question of how much control of the GSEs the federal government would cede is politically fraught – and the debate also remains a highly partisan one. Republicans have long held the end of conservatorship as a top goal, but many Democrats believe that move could reduce liquidity in the market and drive up mortgage rates.
Economists Jim Parrott and Mark Zandi, meanwhile, believe the need for Fannie and Freddie to hold more capital against riskier loans if privatized would “[force] them to either increase mortgage rates for these borrowers or lend less to them.”
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