The question of what to do with Fannie and Freddie, the two dominant mortgage financiers, has bedeviled policymakers for decades.
GOP lawmakers and the mortgage industry are raising questions about the Trump administration’s plans to maintain government control over much of the nation’s housing finance system, defying expectations that it would back off.
President Donald Trump surprised the industry late last month by pledging to take public Fannie Mae and Freddie Mac, the government-controlled companies that stand behind half the $16 trillion residential mortgage market — while preserving an implicit federal guarantee for their solvency. His top housing regulator, Bill Pulte, who oversees the companies, added to the confusion by saying the administration is exploring ways to sell shares while keeping the companies under government authority.
The insistence on preserving significant sway over the two mortgage giants, which were seized by the Bush administration during the financial crisis and placed in conservatorship, is setting up a potential rift with Republicans — and possibly even some administration aides who have long worked to reduce the government’s footprint in the housing market.
“I want to get them out of conservatorship,” said Sen. Mike Rounds (R-S.D.), chair of the Senate Banking subcommittee with oversight of Fannie and Freddie. “But I want to be very careful about how we do it, because we need the secondary market, and we need it to work,” he added, referring to the market where mortgage loans are purchased and sold to investors.
Rep. Andy Barr (R-Ky.), a member of the House Financial Services Committee, said “we need to continue to investigate recapitalization and releasing” the companies from government control.
The question of what to do with Fannie and Freddie has bedeviled policymakers for decades, with Republicans wanting the government to take its hands off housing finance and Democrats fearing that privatizing the firms would destabilize the market and push up mortgage rates.
At stake is a potential windfall of hundreds of billions of dollars for an administration that is staring at massive fiscal deficits. The government holds a roughly $340 billion liquidation preference for the two companies, by one estimate — meaning the money would go to the Treasury Department before anyone else in the event of a sale.
Pulte, the director of the Federal Housing Finance Agency, will meet with Treasury Secretary Scott Bessent and Securities and Exchange Commission Chair Paul Atkins on June 17 to discuss the future of Fannie and Freddie, underscoring the importance of the issue.
Fannie and Freddie don’t make loans themselves, but rather purchase them from mortgage companies and bundle them into securities to sell on the secondary market, freeing up the lenders to make more loans. That, plus the government guarantee, helps keep mortgage rates down, supporters say.
Trump was widely expected to support privatization, after his first administration worked to prepare the companies for their eventual release. But his latest comments look more like what former President Joe Biden would do, according to Jim Parrott, a nonresident fellow at the Urban Institute and a former economic adviser in the Obama White House.
“In the Biden administration, you could imagine a version of this,” Parrott said. “The fact that we’re hearing about it in this administration, I think, is catching folks by surprise.”
The FHFA responded in an email that it is “studying how, if the President elects to take Fannie and Freddie public, it can be done in the safest and soundest manner which includes keeping them in conservatorship.” It added: “In any scenario, we will ensure the [mortgage-backed securities] market is safe and sound and that there is no upward pressure on rates.”
White House deputy press secretary Harrison Fields said the administration “is committed to strengthening the Federal Housing Finance Agency to advance the President’s mission of restoring the dream of homeownership for all Americans.”
Keeping Fannie and Freddie in conservatorship, according to one shareholder, amounts to attaching “training wheels” as the government figures out how to monetize its stake.
“I think Pulte has probably confused people more than anything with his message,” said Tim Pagliara, a shareholder and author of the book “Another Big Lie: How the Government Stole Billions from the American Dream of Home Ownership and Got Caught!”
“So the idea, for example, of allowing these entities to operate in conservatorship is a strategy that they probably talked about with the investment bankers on their primary concern, which is mortgage rates going up,” he added. “It’s like putting training wheels on a bike.”
The administration’s pronouncements have perplexed housing finance analysts who are unsure of what a scheme to take the companies public while keeping them in conservatorship would look like — or whether there would be sufficient investor appetite to make it worthwhile. JPMorgan strategists wrote in a note that they were “flummoxed” by the comments.
“It’s just hard to imagine why anybody would think there would be strong investor interest in that kind of model, unless the government were to convey they were going to run the [government-sponsored enterprises] in a way that’s investor-friendly, and I think we’re a long way off from that,” Parrott said.
David Dworkin, president and CEO of the National Housing Conference, a stakeholders’ group, agreed.
“The most important element of a successful stock sale is a board that is truly independent and has a fiduciary responsibility to shareholders,” he said. “Under conservatorship, that is actually not even allowed. So, without an independent board with a fiduciary responsibility to the shareholders, there is no value to the stock.”
Still, he said, “there are far too many comments coming from major players, including the president of the United States, to avoid the conclusion that major action on conservatorship could be in the very near future.”
Another housing finance analyst, granted anonymity to frankly discuss the nascent plans, also expressed skepticism about the idea that investors would bite on purchasing shares in conservatorship, with the federal government still owning the vast majority of the asset.
“The direction of that control can change at the next election,” the analyst said. “Each administration has already demonstrated they want to use Fannie and Freddie in different ways, so what are you investing in?”
For the most part, Republican lawmakers are keeping their powder dry as they wait for additional details about the administration’s plans.
“[Senate Banking Committee] Chairman [Tim] Scott looks forward to hearing more” from Trump and Pulte on their plans for Fannie and Freddie, spokesperson Ben Watson said.
Asked if conservatorship should end, Sen. John Kennedy (R-La.), a member of the Banking subcommittee with oversight of Fannie and Freddie, said, “I don’t know.”
“We’re going to wait until the first quarter of 2026 to have that conversation,” said Rep. Mike Flood (R-Neb.), chair of the Financial Services housing subcommittee. “Releasing them from conservatorship, that’s one thing, but most of the folks I talked to still want the federal government on the hook.”
The first Trump administration worked to build capital at the companies to prepare them for the end of conservatorship, an effort led by then-Treasury Secretary Steve Mnuchin and former Federal Housing Finance Agency Director Mark Calabria.
Calabria has returned for Trump 2.0, now in a position with the White House Office of Management and Budget. Two key Treasury officials — Jonathan McKernan and Luke Pettit — also hail from the school of thought that Fannie and Freddie should be released from conservatorship.
“The Treasury Department has not really engaged on this yet — so it does not appear to me that the administration is very far into the analysis of options phase,” Parrott said. “Until the Treasury Department really engages in any of this meaningfully, it’s hard to know where all this lands.”
