While some, including investors and President Trump himself, have recently been suggesting a merger of the two government-sponsored enterprises, Fannie Mae and Freddie Mac, others including the Mortgage Bankers Association (MBA) are putting the brakes on such ideas.
The MBA has come out against a merger, warning that competition between Fannie and Freddie is essential to ensure stability, innovation, and fair pricing.
Its position, the MBA says, is to “ensure critical regulatory and market structure/market conduct issues are addressed” with any changes to the GSEs, such as:
- Preserving competition between at least two GSEs;
- Ensuring the Federal Housing Finance Agency (FHFA) has an obligation to maintain a level playing field with respect to pricing, pilots, product, and underwriting variances;
- Preserving “a bright line” to ensure the GSEs do not compete with the primary market; and
- Establishing a well-defined, paid-for federal backstop against the GSEs’ mortgage-backed securities (MBS) that could be tapped only after all private capital (mortgage insurance, credit risk transfer, and GSE capital) is exhausted.
MBA is not alone in opposing a Fannie-Freddie merger. Calls for a merger of Fannie Mae and Freddie Mac have reignited debate over the future of the GSEs, and Democrat lawmakers in particular, such as Sens. Chuck Schumer (D-NY) and Elizabeth Warren (D-MA), have repeatedly voiced concerns about such big changes to Freddie Mac and Fannie Mae.
Their statements highlight growing resistance in Congress to any plan that would collapse the GSEs into a single entity or hand them back to the private market without clear safeguards — and without studying the potential impacts that changes could have.
Arguments opposing a merger center on:
- The potential risks of reduced competition;
- Impacts on affordability;
- Increased systemic risk; and
- Operational difficulties, particularly when considered alongside the complexities of privatization.
Opponents of a merger argue that the GSEs serve as a stabilizing force in U.S. housing finance. By maintaining two separate entities, the market benefits from competition in loan pricing, innovation, and risk management. But collapsing them into a single entity, they warn, could create a monopoly-like structure — reducing lender choice and ultimately harming borrowers.
