Republicans are hoping that if Donald Trump wins the presidential election, he will fulfill a longstanding GOP goal of privatizing the mortgage giants Fannie Mae and Freddie Mac, which have been under government control since the Great Recession. However, Democrats and some economists warn that doing so during a time of high mortgage rates could make buying a home even more expensive. Republicans argue that the Federal Housing Finance Agency has been overseeing the two firms for too long, hindering competition in the housing finance market and putting taxpayers at risk. President Trump attempted to free the companies from government control during his time in office, but Joe Biden’s victory in 2020 prevented this from happening.
According to Project 2025, a handbook for the next Republican administration, the ending of the conservatorship is a key call, but Trump has distanced himself from the document. Some economists have predicted that privatizing Fannie Mae and Freddie Mac could lead to a significant increase in mortgage rates, making it more expensive to buy a home for the average American. However, former FHFA official Mark Calabria believes that the fears of increased mortgage rates are unfounded, stating that the companies are financially healthier now and could be removed from conservatorship by 2027. Calabria argues that strengthening the mortgage financial system is essential to avoid future bailouts.
The debate over the privatization of Fannie Mae and Freddie Mac centers around whether the government should provide a guarantee to these companies in case of failure. Without a guarantee, there is concern that the market may not accept the privatization, potentially leading to chaos in the housing finance market. However, Calabria dismisses these concerns, citing examples of other bailed-out companies that remain public without needing a conservatorship. Economists like Jim Parrott warn that if privatization leads to an increase in mortgage rates, it could have negative consequences for homeowners and the housing market.
While it is uncertain whether Trump plans to revisit the idea of ending the conservatorship, he has expressed regret that his efforts to privatize Fannie Mae and Freddie Mac failed during his administration. The possibility of privatization raises questions about the future of mortgage rates and the housing market, with some experts believing that the market reality may prevent privatization from happening due to the potential negative impact on homeowners. Ultimately, the decision on whether to privatize Fannie Mae and Freddie Mac will have significant implications for the housing finance market and could impact the affordability of homeownership for many Americans.
