Why the GSEs Still Matter
Fannie Mae and Freddie Mac set the tone for nearly all residential mortgage lending in the U.S., with their guidelines underpinning how loans are originated, underwritten, funded, and sold. While most IMBs operate within this framework daily, recent developments at the GSEs and Federal Housing Finance Agency (FHFA) leadership changes make it worth revisiting how these entities shape the market — and how shifts in their governance could impact lending operations and liquidity.
The Evolution of Fannie and Freddie
Fannie Mae, founded in 1938 and made public in 1968, helped standardize the 30-year fixed-rate mortgage by creating a secondary market for mortgage-backed securities (MBS). Freddie Mac, created in 1970, was designed to increase competition and liquidity. Both buy loans, package them into MBS, and guarantee performance — a model that supports lenders’ ability to reinvest and scale while managing risk.
The GSEs' Ongoing Role
Today, Fannie and Freddie continue to drive market access, credit availability, and product standards. By offering automated underwriting systems (DU and LP), they’ve long dictated eligibility criteria for conventional loans. While housing policy discussions now include plans to end conservatorship and privatize the GSEs, IMBs should track these changes closely — any disruption to the status quo could affect rate volatility, credit risk, and investor appetite for agency paper.
Leadership Shake-Up at FHFA
As of this writing, nothing has been mentioned regarding changing the basic business model of either company. But in the second half of March, abrupt changes were made. Structurally, the then-newly appointed FHFA Director Bill Pulte implemented substantial changes within the GSEs. On March 17, 2025, Pulte removed 14 board members from both Fannie Mae and Freddie Mac and appointed himself as chairman of both boards. This move consolidates his control over the GSEs and aligns with the administration’s objectives to reform these entities.
Staff Reductions and New Appointments
Following these board changes, Pulte initiated a series of staffing adjustments within the FHFA. Over 10 percent of the agency’s staff have been dismissed so far — particularly those involved in “non-statutory” roles, including research and statistics teams. Reports suggest that Pulte plans to introduce over 20 political appointees to fill these vacancies. Additionally, FHFA employees have been directed to return to office settings, indicating a shift in workplace policies.
At Freddie Mac, Michael T. Hutchins was appointed interim CEO following the termination of former CEO Diana Reid by Director Pulte. Hutchins, who has served as Freddie Mac’s president since 2020, brings extensive experience from his previous roles at UBS and Salomon Brothers.
Renewed Momentum Toward Privatization
There has been a lot of talk about “privatizing” Freddie and Fannie — more specifically, removing them from conservatorship, a position they’ve been in since September 2008. Yes, discussions regarding the privatization of Fannie Mae and Freddie Mac have gained momentum. In January 2025, federal agencies outlined a framework for the “orderly” release of these entities from conservatorship, a status they have held, again, since the 2008 financial crisis. This proposal aims to transition the GSEs back to private control while ensuring stability in the housing finance system.
Even so, FHFA Director Pulte has said he will prioritize improving efficiency and eliminating waste at the GSEs over re-privatizing Fannie and Freddie — though he has also expressed his support for removing the GSEs from their now nearly 17-year conservatorship.
Bill Ackman’s Role and Market Concerns
Billionaire investor Bill Ackman has re-engaged in activist investing, leveraging his social media influence to advocate for the privatization of the GSEs. Ackman proposes a government exit strategy that could benefit shareholders, including himself, and aligns with the administration’s interest in reducing federal involvement in the housing market.
All of these developments indicate a significant shift in the governance and strategic direction of Fannie Mae and Freddie Mac, reflecting broader efforts to reform the U.S. housing finance system. But the details of any plan to release the GSEs from government control are complicated, given liquidation preferences, credit risk transfer instruments, and corporate credit ratings. The result has been a quagmire and a continuation of government ownership for much longer than originally intended.
Looking Ahead: Risks and Caution
But nearly everybody in the current administration likes the idea of releasing the GSEs, in theory. Housing experts argue such a change, especially done in a haphazard way, could increase mortgage rates further in an already volatile market. Yes, critics are worried about the influence Bill Ackman has over Donald Trump and how it may impact millions of homeowners and future borrowers. All agree that changes can’t be done with the wave of a wand and will take years of hard work and consideration. The industry, and borrowers, hope that any changes don’t impact their role in financing homes for Americans.
