Fannie Mae and Freddie Mac, two of the biggest mortgage firms in the U.S. will not be privatized any time soon according to Bill Pulte, who was confirmed by the U.S. Senate on Thursday to lead the Federal Housing Finance Agency for the Trump administration.
"Fannie and Freddie shouldn't be in conservatorship forever," Pulte told CNN on Thursday. "But it's critical to ensure any discussion about exiting conservatorship needs not only to ensure safety and soundness but how it would affect mortgage rates."
In January, President Donald Trump called for the privatization of two of the largest government-owned mortgage firms. This was emphasized by hedge fund tycoon and Trump-backer Bill Ackman, who posted his thoughts in a post on X (formerly Twitter).
READ: Donald Trump to privatize mortgage firms Fannie Mae and Freddie Mac (January 3, 2025)
The U.S. housing market is struggling right now with escalating home prices and borrowing rates. The U.S. housing market in 2025 is expected to grow modestly due to high mortgage rates and limited housing supply. Home sales are projected to increase by 3% or less, making homeownership challenging, especially for first-time buyers.
Mortgage rates are anticipated to remain elevated, with the average 30-year rate around 6.65%. Some regional markets, such as Colorado Springs, Miami, and Virginia Beach, may experience higher growth in both home sales and prices. Despite these regional variations, the overall national market will likely stay stable, with limited price appreciation and slow activity in many areas.
What are Fannie Mae and Freddie Mac?
Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are government-sponsored enterprises (GSEs) that play a critical role in the U.S. housing market. Their primary function is to support the availability and stability of mortgage financing. Both organizations buy mortgages from lenders, providing liquidity to the housing market, which allows lenders to offer more loans to homebuyers.
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Fannie Mae was established in 1938 as part of the New Deal to increase homeownership by making mortgages more accessible. Freddie Mac was created in 1970 to provide competition and further support to the secondary mortgage market. These GSEs do not originate loans but rather purchase loans that meet certain criteria, package them into mortgage-backed securities (MBS), and sell these securities to investors. This process helps lenders manage risk and ensures that there is a steady flow of mortgage funds in the market.
During the 2008 financial crisis, both Fannie Mae and Freddie Mac were placed into conservatorship by the federal government due to their financial struggles. While still under government oversight, they continue to play an essential role in stabilizing the housing market by guaranteeing a large portion of the nation's mortgages, making home loans more accessible for borrowers.