Could the privatization of the government-sponsored enterprises (GSEs) that the Trump administration is trumpeting be all talk, but result in no action?
Stanley Middleman, president of Freedom Mortgage certainly thinks so, and so does Union Home Mortgage president Mark Jones.
“I don’t think anything material will come of it,” Middleman said on a panel session, "From the Front Page to the Main Stage," during the Mortgage Bankers Association’s Annual Convention & Expo in Las Vegas. To which Jones of Union Home Mortgage, chimed in, “I think it’s a nothing burger.”
Still, the MBA is concerned that if the White House begins the process of taking Fannie Mae and Freddie Mac out of conservatorship, where they have resided for the past 17 years, the system that’s put in their place preserves, in the words of MBA President and CEO Robert D. Broeksmit, CMB, “what works and does no harm.”
Toward that end, Broeksmit, who led the panel of “people in the market,” said to preserve competition, there needs to be a strong rivalry between “at least two” secondary market entities. “We need a new system without redundancy,” he said.
Jones, a previous MBA chairman, stressed that the final outcome should make certain mortgage rates don’t rise substantially. There also needs to be a “bright line” between the primary and secondary markets so that Fannie Mae and Freddie Mac don’t cross over into lender territory, he added.
“A level playing field needs to remain in place,” he said.
Owen Lee, founding partner of Success Mortgage Partners and 2026 MBA chair-elect, said his “biggest concern” is that the Trump administration may rush to get the GSEs out of conservatorship and drastically disrupt the market, “I’m not certain they understand the huge damage they can cause if they get it wrong,” he lamented.
Lee noted that the Fannie and Freddie’s guarantees, which were once implicit, have been almost explicit since they have been under federal edict. And he wants to be sure it remains at least the way it used to be when they exit conservatorship.
Middleman agreed that the primary market needs government support or rates will be higher, “no ifs, ands, or buts.” But he said lenders have just begun to win back the confidence of investors and it’s just “too risky” to return to the days when Fannie Mae and Freddie Mac needed the government bailout in 2008.
“If (privatization) doesn’t go right, all bets are off,” the Freedom Mortgage leader said.
“History tells us that the first money to abandon the playing field is private capital. To avoid that possibility” and to keep running their businesses with enough product, lenders need to be sure the guarantee remains in place.
Removing the federal backstop also is very concerning to Lee.
“If the market should tank,” he warned, investors will be “out of here in an hour” without a GSE guarantee.
And Ramon Gomez, managing director of regulatory affairs for JPMorgan Chase & Company agreed, “it is essential for private capital to remain in the marketplace. It’s an incredibly important step.”
