The Prospects of Privatization for Fannie Mae and Freddie Mac in 2025
Key Takeaway: There has been “serious consideration” expressed by President Trump to privatize Fannie Mae and Freddie Mac. A privatization would reshape mortgage markets from both structural and operational perspectives, impacting lenders, agents, investors, and developers alike. With privatization potentially on the horizon, real estate stakeholders should look beyond the uncertainty and identify opportunities to develop strategies for advocacy and risk mitigation communications.
On May 21, President Trump posted on Truth Social that he is “giving very serious consideration” to the privatization of Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that collectively back roughly half of all U.S. mortgages.1 While privatization has long been discussed, the current political climate has brought the prospect closer to reality. For real estate professionals, investors, and mortgage market participants, understanding the path to privatization and its implications is more critical than ever.
The Enterprises and Conservatorship
Created by Congress to support housing affordability and ensure liquidity in the mortgage market, Fannie Mae and Freddie Mac purchase loans from lenders and either hold them or package them into mortgage-backed securities (MBS) sold to investors. This secondary market structure has enabled the widespread availability of the 30-year fixed-rate mortgage, a pillar of the American housing system.2
The 2008 financial crisis exposed weaknesses in this system, forcing the U.S. Treasury Department to inject $187 billion into the GSEs and place them under the conservatorship of the Federal Housing Finance Agency (FHFA).3 This conservatorship remains in place today―more than 15 years after the height of the housing crisis. Though the American housing market has several notable imperfections and barriers to affordability, the broader housing market has stabilized, as have the finances of Fannie Mae and Freddy Mac.
Now, with President Trump settling into his second term, policymakers are once again mulling privatization of the GSE’s as Congress and the administration set their housing priorities.4
How Privatization Could Work
Privatization would be a multifaceted endeavor, beginning with the need to significantly increase the GSEs’ capital reserves. Under the FHFA’s Enterprise Regulatory Capital Framework (ERCF), both entities must build sufficient capital to operate independently.5 As of Q1 2025, Fannie Mae and Freddie Mac reported being $33 and $162 , respectively, short of their capital requirements under ERCF. 6,7 To bridge this gap, the GSEs’ approach has been to stockpile their earnings, but relying on that strategy alone could take years.8 Accelerated options include IPOs and private capital infusions, each of which would raise questions about control, governance, and long-term mission.9
Complicating matters is the U.S. Treasury’s substantial stake in the GSEs, holding senior preferred shares with a combined $340 billion liquidation preference.10 Possible paths forward include:
- Converting preferred shares to common equity,11
- Retaining the Treasury’s stake to benefit from future profits,12 or
- Forgiving part of the obligation — though this would likely require Congressional action.13
Recapitalization must strike a careful balance: supporting housing market stability, instilling investor confidence, and removing any implicit government guarantees – all while avoiding market disruption. The ERCF offers a roadmap but executing it will demand political alignment and technical precision.
Key Decisionmakers
Privatization will also hinge on navigating a fragmented stakeholder landscape. Secretary of Housing and Urban Development Scott Turner has championed the idea, framing privatization as a necessary modernization of the U.S. housing finance system.14 FHFA Director Bill Pulte, while advancing operational reforms and installing new leadership, has taken a more cautious stance, prioritizing stability over speed.15
In Congress, Chair of the Senate Committee on Banking, Housing, and Urban Affairs Tim Scott has expressed support for a phased, transparent transition, while Senator Elizabeth Warren – the committee’s ranking member – has issued sharp warnings about affordability risks and the potential for reduced credit access.16,17 Treasury Secretary Scott Bessent, whose department holds critical financial claims on the GSEs, will be pivotal in any restructuring negotiations. Meanwhile, shareholders – especially hedge funds and institutional investors such as Bill Ackman’s Pershing Square – continue to press for privatization that unlocks equity value.18
Privatization in Today’s Real Estate Sector
For real estate professionals, these policy debates have the potential to make a profound, foundational impact on their work. Mortgage lenders and originators rely on GSE liquidity to maintain steady lending activity. Without an implicit government guarantee, MBS investors may demand higher yields, translating to increased mortgage rates and potentially tightening credit availability. This shift would most acutely affect first-time and lower-income buyers, potentially dampening demand for homeownership.
Institutional investors in MBS may reprice risk or shift capital away from GSE-backed assets, impacting the broader cost of borrowing in capital markets. Real estate agents and brokers could see slower transaction volume if financing becomes less accessible or more expensive.
Homebuilders may pull back on new construction if buyer pools shrink or lending slows. And affordable housing developers, many of whom rely on GSE multifamily programs, may find it harder to secure favorable terms, particularly if mandates for mission-driven lending are diluted in a private model.
However, thoughtfully structured privatization could also bring positive outcomes. By introducing private competition and more efficient capital allocation, GSEs may spur innovation in mortgage products and improve services offerings – especially benefiting smaller lenders. Increased market participation could lead to more competitive mortgage pricing, potentially offsetting some of the short-term cost pressures.
Final Thoughts
In short, privatization would reshape not just the financial plumbing of mortgage markets but also the day-to-day landscape for lenders, agents, investors, and developers alike.
As the future of Fannie Mae and Freddie Mac hangs in the balance, real estate stakeholders face a moment of profound uncertainty, and opportunity.
For organizations navigating this uncertainty, the stakes are too high to take a wait-and-see approach. Strategic foresight, informed advocacy, and integrated risk communications will be critical in anticipating policy moves, shaping market narratives, and safeguarding institutional interests.
At FTI Consulting, we are uniquely positioned to help clients bridge the gap between public affairs, policy strategy and reputation management. Our deep understanding of the intertwining key player relationships in the real estate sector, combined with real-time intelligence and stakeholder engagement expertise, allows us to help clients not just react to change, but lead through it. Financial institutions, real estate investors, trade associations, or mission-driven developers can benefit from an external expert perspective to help guide your positioning, align your priorities, protect your long-term growth strategies to thrive amid any coming disruption. Contact us to learn more.
References
[1] President Donald J. Trump, Truth Social (May 21, 2025), https://truthsocial.com/@realDonaldTrump/posts/114548257487682819.
[2] “Basics of Fannie Mae Single-Family MBS,” Fannie Mae (November 2024), https://capitalmarkets.fanniemae.com/media/4271/display.
[3] Thompson, Daniel, “The Rescue of Fannie Mae and Freddie Mac – Module B: Senior Preferred Stock Purchase Agreements”, Journal of Financial Crises: Vol. 3 : Iss. 1, 319-352 (2021), https://elischolar.library.yale.edu/journal-of-financial-crises/vol3/iss1/10/.
[4] O’Donnell, Katy, “Trump has a plan to remake the housing-finance system. It’s baffling to many lawmakers and experts.”, Politico (June 15, 2025), https://www.politico.com/news/2025/06/15/trump-housing-fannie-freddie-mortgage-treasury-00403780.
[5] “Enterprise Regulatory Capital Framework,” 12 C.F.R. pt. 1750 (December 17, 2020), https://www.govinfo.gov/content/pkg/FR-2020-12-17/pdf/2020-25814.pdf.
[6] “Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934”, United States Securities And Exchange Commission (March 31, 2025), p. 45 https://www.fanniemae.com/media/55711/display.
[7] “Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934”, United States Securities And Exchange Commission (March 31, 2025), https://www.freddiemac.com/investors/financials/pdf/10q_1q25.pdf.
[8] Swagel, Phillip L., “Re: An Update to CBO’s Analysis of the Effects of Recapitalizing Fannie Mae and Freddie Mac Through Administrative Actions”, Congressional Budget Office (December 13, 2024), https://www.cbo.gov/system/files/2024-12/60810-GSEs.pdf.
[9] Rossi, Clifford, “Risk Matters: It’s Time to Merge Fannie Mae and Freddie Mac”, Robert H. Smith School of Business (April 10, 2025), https://www.rhsmith.umd.edu/news/risk-matters-its-time-merge-fannie-mae-and-freddie-mac.
[10] Dan, Ion, “Fannie Mae and Freddie Mac Are in Scope for Reform”, Western Asset (February 26, 2025), https://www.westernasset.com/us/en/research/blog/fannie-mae-and-freddie-mac-are-in-scope-for-reform-2025-02-26.cfm.
[11] Ibid.
[12] Swift, Rocky, “Fannie, Freddie OTC shares soar to 2008 highs after Trump comments on spin-off”, Reuters (May 22, 2025), https://www.reuters.com/business/fannie-freddie-otc-shares-soar-after-trump-comments-spin-off-2025-05-22/.
[13] Light, Joe, “Taking Fannie and Fredie Public Is Trump’s Dream. It Might Be Just a Fantasy”, Barron’s (June 12, 2025), https://www.barrons.com/articles/fannie-freddie-ipo-ackman-trump-e28bc38e.
[14] Heeb, Gina, AnnaMaria Andriotis, Corrie Driebush, “Fannie, Freddie Privatization, Cost-Cutting and New Name Are Priorities for HUD Chief”, The Wall Street Journal (February 5, 2025), https://www.wsj.com/finance/regulation/new-hud-chief-sets-sights-on-fannie-freddie-cost-cutting-and-new-name-2e83652f.
[15] Delouya, Samantha, “Privatizing Fannie and Freddie not a top priority, says Trump’s new FHFA director”, CNN Business (March 13, 2025), https://www.cnn.com/2025/03/13/business/fannie-freddie-privatization-fhfa-director.
[16] Tim Scott, Letter to The Honorable Sandra Thompson, United States Senate Committee on Banking, Housing, and Urban Affairs (January 15, 2025), https://www.banking.senate.gov/imo/media/doc/letter_to_fhfa_director_thompson.pdf.
[17] “Ahead of Confirmation Hearing, Warren Questions FHFA Director Nominee Pulte on Fannie Mae and Freddie Mac Privatization Impacts and Potential Conflicts of Interest”, United States Senate Committee on Banking, Housing, and Urban Affairs (February 24, 2025), https://www.banking.senate.gov/newsroom/minority/ahead-of-confirmation-hearing-warren-questions-fhfa-director-nominee-pulte-on-fannie-mae-and-freddie-mac-privatization-impacts-and-potential-conflicts-of-interest.
[18] Nunes, Flávia Furlan, “No Congress, no rate hikes: Bill Ackman’s plan to privatize the GSEs”, HousingWire (April 17, 2025), https://www.housingwire.com/articles/no-congress-no-rate-hikes-bill-ackman-plan-to-privatize-gses/.
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