President Trump said he is “giving very serious consideration” to returning mortgage giants Fannie Mae and Freddie Mac to the private sector — with a massive public offering of stock — after more than a decade in the government’s hands.
Analysts have said the move could spark a major windfall for the US government — but also warn it could raise mortgage rates, worsening the nation’s housing affordability crisis.
“Fannie Mae and Freddie Mac are doing very well, throwing off a lot of CASH, and the time would seem to be right. Stay tuned!” Trump wrote in a post on Truth Social late Wednesday.
He added that he will make a decision in the near future after speaking with Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and William Pulte, who leads the Federal Housing Finance Agency.
The companies play a key role in the nation’s housing finance system, buying mortgages from lenders and packaging them into mortgage-backed securities. Fannie Mae and Freddie Mac have been under a government conservatorship since the 2008 financial crisis, with the US extending lines of credit to the firms, overseeing their operations and owning vast majority stakes in both.
Shares in Fannie Mae, or Federal National Mortgage Association, and Freddie Mac, also known as Federal Home Loan Mortgage Corp, jumped 41.5% and 40.9%, respectively, by approximately 3:15 p.m. ET.
The US government could reap more than $250 billion and erase about $8 trillion in liabilities from the federal balance sheet by selling its stake in Fannie and Freddie, according to estimates from James Thorne, chief market strategist at Wellington-Altus Private Wealth, in a post on X.
“I think it’s very likely because they need the money,” Chris Whalen, chairman of Whalen Global Advisors, said on Thursday.
“The reason they’re talking about this is they need the cash in order to make their tax cuts and budget reconciliation bill work,” he added.
The GOP’s spending bill includes significant tax cuts that are expected to increase budget deficits by about $3 trillion over the next decade. The House narrowly approved the bill early Thursday morning, sending it off to the Senate.
Taking Fannie and Freddie public could also benefit Trump allies like billionaire Bill Ackman, whose hedge fund Pershing Square Capital Management has huge stakes in both mortgage firms.
It was reported that he potentially made $1 billion from the investments earlier this year as the stocks soared on hopes that Trump would take them public, according to Barron’s.
He reacted to Trump’s Truth Social post about taking the firms public with a thumbs-up emoji on Thursday.
John Paulson, the billionaire hedge fund manager behind Paulson & Co who was largely seen as a contender for Treasury secretary under Trump, also owns sizable investments in the mortgage giants.
“The conservatorship was always intended to be temporary so it makes sense that policymakers release them from conservatorship now that reforms are complete,” a spokesperson for Paulson previously told The Wall Street Journal.
“The government will be the biggest winner in a release of [Fannie and Freddie],” the spokesperson continued.
Bond investors, however, have been panicking over the deficit risks in the bill over the past few weeks, sending long-term yields soaring. The 30-year Treasury yield hit 5.068% on Thursday.
And investors could grow more hesitant to buy mortgage-backed securities if the government loosens its control, demanding extra yield as compensation.
Yields are closely tied to interest rates on mortgages, credit cards and loans, so while the move could mean big profits for the government, it could also bring consumers serious pain in the form of higher rates.
Those rates could potentially jump 0.5% percentage points or more, according to investor surveys cited by Bloomberg.
During a Mortgage Bankers Association’s conference earlier this week, Pulte said it was time to get the “bloated, overweight and obese” mortgage giants Fannie and Freddie “on the treadmill.”
As for whether the mortgage giants remain in the government’s control, that’s a move that will be done “in the best interest of the American people, but ultimately that will be the boss’s decision,” Pulte added in a nod to Trump.
In February, Bessent said that the decision to take Fannie and Freddie public depends on mortgage rate implications.
“The priority for a Fannie and Freddie release, the most important metric that I’m looking at, is any study or hint that mortgage rates would go up,” he told Bloomberg.
