Seventeen years after the 2008 bailout, Fannie Mae and Freddie Mac remain under federal conservatorship, with a future that’s yet to be defined. And that limbo helps shape how every conforming loan is priced, approved, hedged, and sold.
But the political conversation has been shifting. The Trump Administration has suggested keeping the GSEs under government control while still tapping public markets for cash, although other voices push for a clean release.
Either path will ripple through your rate sheets, your hedging desks, and your servicing valuations. National Mortgage Professional asked readers what they think about taking Fannie and Freddie public again, and got some widely polarized responses.
Overall Results
In the survey results overall, a majority of NMP readers said yes, bringing Fannie and Freddie public is a good idea (52%). While only 33% said that is not a good idea, about one out of every six, 16%, of respondents said they were unsure.
Looking deeper among survey respondents who provided their job title:
- 38% identified as mortgage brokers. In this group, 54% said yes, 42% said no, and 4% said they were unsure, making this segment the one with the highest proportion of responses in the negative;
- 34% identified as retail mortgage bankers. In this group, 60% said yes, 24% said no, and 16% said they were unsure;
- 10% identified as wholesale mortgage bankers. In this group, 63% said yes, 25% said no, and 13% said they were unsure, making this segment the one with the highest proportion of responses in the affirmative; and
- 14% identified as vendors or service providers to mortgage professionals. In this group, 40% said yes, 30% said no, and 30% said they were unsure, making this segment the one with the highest proportion of those indicating they're uncertain on the issue.
Detailing Their Opinions
Within the responses NMP received, the deeper write-in commentary also merits attention. Some NMP readers were more gung-ho about taking Freddie and Fannie public, while some were supportive of doing so — just very cautiously and thoughtfully.
Others said it’s a bad idea to change the status quo and that the GSEs’ current structure is working well, and has at least prevented another financial meltdown as in 2008. Here’s a closer look at some of the responses we received.
One Camp: End Conservatorship
“Do we have free market capitalism or not? Just like the cost of education and healthcare, every time the government gets involved the price goes up. Since government intervention is the cause of today's housing affordability problem, more government intervention and control is unlikely to fix it.”
“Privatizing Fannie and Freddie could boost efficiency, reduce taxpayer risk, and encourage innovation through private capital and governance. It may also lead to better risk-based pricing. However, without strong oversight, it could raise mortgage rates and limit access for some buyers. A careful transition is key to maintaining market stability.”
“Needs to be done in a well-thought-out, coordinated manner, with transparency to the public and market to help ensure a smooth transition. This does not seem to be the strong point of this administration, so that's a bit worrisome.”
“I think it will help stabilize the Mortgage markets and improve the probability of Rates improving which will help somewhat with affordability in many regions in the US.”
“Given their history, they should be given the opportunity to go public again, however not without strict reforms put into place.”
“This gives Fannie and Freddie more freedom and less rules and tiny details to worry about. Just maybe this would mean less underwriting tightness due to the strict standards these loans are held to, to be sold on the OPEN market not just the gov.”
The Other Side: Keep Things As They Are
“It's working so far, why deal with a change in a current chaotic world of markets?”
“The current administration is not interested in anything but manipulating the rates and market to benefit themselves. They've already lowered oversight previously added after the last collapse and will ultimately harm homeownership for everyday people.”
“The GSEs spin off over $50 billion in profits to the Treasury annually and it would be hard to replace that income.”
“I wonder if it would deregulate portions of the mortgage industry and cause chaos and more risk to clients due to the deregulation. More predatory lending is not what we need.”
“Under the current government, these agencies will cease to exist as we currently observe them. I don’t think this will benefit the lower end of the purchasing market!”
“If the GSEs lose their implicit backing of the Federal Government, mortgage rates will climb, in my opinion.”
Conclusion
This survey delivered a mixed bag of results, and it's clear NMP readers aren’t all convinced that changes to Fannie and Freddie will be a good thing — although more responses were supportive of the Trump Administration’s currently proposed plans to take the GSEs public.
Part of that is likely because many questions about potentially post-conservatorship Fannie Mae and Freddie Mac have yet to be answered, and removing that conservatorship will take time and a great deal of planning.
- Further reading: For more on this topic, NMP spoke with Marty Green, Principal at mortgage-focused law firm Polunsky Beitel Green based in San Antonio, Texas.
