Trump plans to privatize Fannie Mae and Freddie Mac.

On Wednesday Eastern Time, U.S. President Donald Trump announced on his social media platform Truth Social that he is "very seriously considering" the relisting of Fannie Mae and Freddie Mac. He stated that he will discuss the plans with Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Federal Housing Finance Agency (FHFA) Director William Pulte, and a decision will be made in the "near future."

Trump said: "Fannie Mae and Freddie Mac are currently operating well with sufficient cash flow, and now seems like the time to return them to the market."

Background: The saga of Fannie and Freddie

Fannie Mae and Freddie Mac, established in 1938 and 1970 respectively, are key pillars of the U.S. mortgage market, together supporting about 70% of the mortgage market. Although they do not lend directly, they enhance the accessibility of home financing in the U.S. by purchasing loans and packaging them into securities.

However, during the 2008 financial crisis, both companies suffered heavy losses, prompting the federal government to take control and infuse up to $187.5 billion to avert systemic risk. Since then, Fannie Mae and Freddie Mac have been under "conservatorship," with comprehensive oversight from the FHFA. In 2010, their stocks were delisted and moved to OTC trading.

While the government's control stabilized the market, the prolonged "conservatorship" is seen as disrupting market mechanisms. During his first term, Trump attempted to privatize the entities but was unsuccessful. Revisiting this issue has sparked considerable attention in both market and policy circles.

Positive market reactions, stock prices hitting new highs

Since Trump's election victory last year, investor expectations for "privatizing" Fannie Mae and Freddie Mac have risen, with their OTC market stock prices continually climbing. In January, following the FHFA's new guidelines granting the Treasury the final authority to end conservatorship, the entities’ stock prices surged nearly 30% in a single day, reaching a five-year high.

Prominent investor Bill Ackman previously predicted that under Trump's "2.0 administration," the companies could be privatized and relisted around 2026.

Privatization debate: Boosting market vitality or raising mortgage costs?

Proponents believe that privatizing "the twins" would reduce taxpayer risk and improve housing finance market efficiency. Some of Trump's economic advisers advocate that this would enhance corporate autonomy and restore normal commercial operations.

However, critics warn that privatization could lead to investors reassessing the risk of mortgage-backed securities (MBS) issued by "the twins," potentially driving mortgage rates higher. Given the already high mortgage rates and rising house prices in the U.S., further rate increases would elevate home buying costs and affect housing market stability.

Moody's Analytics chief economist Mark Zandi has warned that privatization could cost American families an additional $1,800 to $2,800 annually on mortgages.

Cautious regulatory stance, interest rate impact as a core concern

Treasury Secretary Bessent previously mentioned that any decision regarding the end of "conservatorship" will primarily consider the impact on mortgage rates. He emphasized: "We must remain extremely cautious as long as there is any evidence that rates may rise because of this."

Current FHFA Director Pulte also stated that any privatization policy must be based on a "thorough assessment of the impact on mortgage rates," ensuring it does not negatively affect the cost of home buying for the public.

Outlook: Policy signals may reshape the housing finance path

Fannie Mae and Freddie Mac remain under government oversight, and relisting requires extensive coordination, legislative approval, and market evaluation. Trump's remarks undoubtedly signal new policy developments, suggesting that housing finance system reform may resume. Over the next few months, the Treasury and FHFA will be key focal points for observing policy trends, and whether privatization will materialize is yet to be seen.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.