First, Do No Harm – June 2, 2025

The White House’s initiative to take the GSEs public entails maintaining confidence in the mortgage bond market

When Franklin D. Roosevelt died a few months into his fourth term 80 years ago, he had held office for so long that many Americans at the time couldn’t remember a President before him. Similarly, anyone whose time in the residential sector began after the onset of the Global Financial Crisis in 2008 would only know Fannie Mae and Freddie Mac as mortgage entities in government conservatorship rather than as the independent, private companies they once were. 

However, that may change, or begin to change, under another New Yorker in the Oval Office. Since the start of the second Trump administration earlier this year, there have been reports that the President may seek to change the GSEs’ status, realizing a goal he initially pursued during his first term. He made that intention clearer this past week with a Truth Social posting in which he vowed to work toward taking Fannie and Freddie public. 

Yet what that new era will look like isn’t immediately clear. Does the Trump administration seek to end conservatorship for the two mortgage giants? Privatize them? Combine them into a single entity? The latter scenario emerged as a possibility in March when Bill Pulte, director of the Federal Housing Finance Agency, ousted the boards of Fannie and Freddie and appointed himself chairman. 

Appearing on Bloomberg Television a couple of days after the Truth Social posting, Pulte sought to provide some clarity without committing to a specific outcome. He said that he, Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick will review potential options for the two GSEs, adding that the final call will be Trump’s. 

One thing is clear, though. “The implicit guarantee under conservatorship, as people call it, will be in place and the mortgage bond market will be very safe,” Pulte said. Echoing the Hippocratic Oath sworn by physicians, Pulte said the top priority “is to do no harm. I think there’s going to be a do-no-harm approach and we’re going to keep those implicit guarantees intact. And I wouldn’t be surprised to see mortgage bond spreads actually compressed throughout this process.” 

Barron’s reported that this implicit guarantee—i.e., the understanding that the government would step in to stem losses in the event of a crisis—reduces the risk investors see in Fannie and Freddie MBS. “Losing it would price more risk into the product, cause upheaval in that market, send mortgage rates higher and restrict credit access,” according to Barron’s. ”Keeping the loans’ implied government backing would avoid such disruption.” 

Asked what that guarantee will look like—whether it will mark a return to the pre-GFC tacit understanding or be stated more explicitly—Pulte replied, ”We’re studying all sorts of different things. And obviously, this will be the President’s decision to make.” One of the scenarios would be to go public, although not necessarily to go private at the same time.   

The suggestion of going public may refer to a strategy, first reported in The Wall Street Journal, that would seek to raise an additional $20 billion to $30 billion from new investors. However, Barron’s reported, “The logistics that surround such an offering while keeping the companies under conservatorship [aren’t] immediately clear.” 

To offer more shares to the public, the government would have to convert or otherwise address its interest in the companies, KBW analyst Bose George told Barron’s. The Treasury owns warrants to purchase 79.9% of Fannie and Freddie’s common stock. 

The consensus view was that the companies would attempt to exit conservatorship at roughly the same time that they offered shares, George told Barron’s. “To go public without exiting wasn’t what people were anticipating,” he said. “We need to look at that again to see how that might work.” 

Whatever course of action emerges, though, Pulte predicted that Trump would keep his hand on the tiller. “I don’t see any scenario where the President isn’t in control of Fannie Mae and Freddie Mac,” he told the Bloomberg audience. “This is a man who understands mortgage rates, interest rates and home buying and construction better than anyone.” 

It’s now clear that “change is coming, and it’s coming fast,” Steven Glick, mortgage sales director for fintech platform HomeAbroad, told U.S. News. Referring to Pulte’s ouster of Fannie and Freddie’s boards, Glick said, “This kind of overhaul usually happens when someone has a game plan – and I’d bet Pulte has one [for privatization].

“That said, full privatization isn’t something that happens overnight. It’s a huge shift, and there are a lot of regulatory and market factors at play. If this is the goal, we could start seeing major moves in 12 to 24 months, but full privatization could still take years to execute properly.”