President Donald Trump’s push to take Fannie Mae and Freddie Mac public is stirring hopes among hedge fund investors but triggering fresh concern in the housing sector over the future of affordable mortgages.
Last month, President Trump announced plans to end federal conservatorship of the mortgage finance giants, a status they have held since the 2008 financial crisis. Returning them to private ownership could mark a significant shift in the $12 trillion U.S. mortgage market, where the two companies guarantee more than half of all home loans.
Major investors, including billionaire hedge fund manager Bill Ackman, have long awaited such a move. Ackman’s firm, Pershing Square Capital, holds a sizable stake in both Fannie and Freddie. “We have been leading the charge,” President Trump supporter Ackman posted on social media, adding that shareholders are simply seeking credit for what the firms have already repaid to the government.
Since President Trump’s return to office, Fannie and Freddie’s shares have soared—Fannie’s stock climbing nearly 500 percent in the past year, and Freddie’s gaining close to 400 percent. Investors are betting that this time, President Trump’s administration will succeed in spinning the firms off after a failed attempt during his first term.
But housing analysts and Democratic lawmakers are urging caution. In a letter to Federal Housing Finance Agency Director William Pulte, Senate Democrats warned that privatizing the two companies could lead to higher borrowing costs and restrict access to fixed-rate mortgage options, such as the 30-year loan.
“This is an enormously complicated undertaking,” said Lori Goodman, a housing expert at the Urban Institute. She warned that without a clear government guarantee, lenders may raise rates to offset the increased risk, especially for lower-income borrowers.
President Trump has sought to ease such fears, saying the U.S. will maintain its implicit guarantee and oversight. “I am working on TAKING THESE AMAZING COMPANIES PUBLIC,” he wrote in a recent post, “but I want to be clear, the U.S. Government will keep its implicit GUARANTEES.”
Still, experts say that may not be enough. Any perceived withdrawal of government backing could shake investor confidence in mortgage-backed securities and send ripple effects through one of the world’s largest credit markets.
Complicating matters further is the Treasury’s senior preferred stake in Fannie and Freddie. The companies still owe the government roughly $190 billion from their bailout, which takes priority over private shareholders. While both firms have paid over $300 billion in dividends, some analysts argue private investors won’t profit unless that debt is forgiven.
“This is a speculative bet,” said Bose George, managing director at Keefe, Bruyette & Woods. “Right now, the private equity value is deeply negative.”
As President Trump moves forward with plans to restructure the housing finance system, the outcome could shape the cost and availability of home loans for years to come.
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