A Brief Background
Fannie Mae and Freddie Mac were chartered by Congress to ensure liquidity, stability, and affordability in the mortgage market. By purchasing mortgages from lenders and packaging them into mortgage-backed securities (MBS), they have made homeownership accessible to millions of Americans. Following the 2008 financial crisis, both entities were placed under federal conservatorship to prevent their collapse, a status they’ve maintained for over 15 years.
Efforts to publicize them—essentially converting them into private companies with shareholders and market-driven governance—would mark a major shift in U.S. housing finance policy. Let’s examine the likely outcomes for various stakeholders in the mortgage industry.
1. Lenders: Shifting Risk and Competition
For mortgage lenders, publicizing the GSEs could mean increased competition and reduced government guarantees. Under a privatized model, lenders may see higher costs if investor confidence in MBS declines without an implicit government backstop. On the other hand, some large lenders may benefit from a more competitive secondary market, particularly if new private guarantors emerge.
Smaller lenders, however, could face disadvantages. Fannie and Freddie have historically provided a level playing field by offering uniform pricing. Without strong regulatory guardrails post-privatization, larger players could negotiate better terms or gain unfair advantages, squeezing smaller institutions out of the market.
2. Borrowers: Affordability and Access Concerns
Homebuyers—especially first-time and lower-income borrowers—may be adversely affected if the cost of borrowing rises. Fannie and Freddie currently help set the tone for underwriting standards and pricing. If privatized, these entities may be driven to reduce exposure to riskier loans, which could tighten credit availability or raise interest rates for non-prime borrowers.
Furthermore, a move away from federal oversight could weaken affordable housing goals that are currently embedded in GSE mandates. Unless specific affordability objectives are legally codified, there is a risk that profit-driven models would prioritize shareholder returns over public access to housing finance.
3. Investors: New Opportunities, New Risks
For investors, the publicization of Fannie Mae and Freddie Mac presents potential upside in terms of market opportunities and the creation of a more diverse and competitive MBS landscape. A restructured GSE system could invite new players, increase innovation in mortgage finance, and enhance market liquidity.
However, investor confidence hinges on the clarity and strength of the regulatory framework governing privatized GSEs. Ambiguity around future government support in the event of economic downturns could deter investment or demand higher yields to compensate for perceived risk, which would indirectly raise mortgage costs.
4. Regulators and Policymakers: Balancing Market Stability and Innovation
The federal government faces a difficult balancing act. Publicizing the GSEs could reduce taxpayer exposure in the event of future bailouts, which is a compelling argument for fiscal conservatives. However, losing direct oversight of two institutions that handle over half of all U.S. mortgage originations could reduce the government’s ability to stabilize the housing market during times of crisis.
To mitigate this, policymakers would need to establish a robust framework that maintains mission-oriented mandates (e.g., affordable housing, fair access) while allowing flexibility for the enterprises to innovate and compete.
Conclusion: High Stakes, Uncertain Outcomes
Publicizing Fannie Mae and Freddie Mac would represent a seismic shift in the U.S. housing finance system. While such a move could drive efficiency, reduce federal liability, and increase market competition, it also risks exacerbating inequalities in mortgage access, increasing borrowing costs, and destabilizing the secondary mortgage market without careful planning and regulation.
Ultimately, the future of the mortgage industry hinges not just on whether Fannie and Freddie are publicized, but on how such a transition is implemented. Ensuring that affordability, accessibility, and stability remain core objectives will be essential to preserving the American dream of homeownership in a privatized GSE era.
About the Author
Marissa Berends is a Certified Abstractor and Industry Relations Coordinator at Capitol Lien, a nationwide due diligence and risk mitigation services provider. Since joining the company in September 2021, she has earned abstractor certifications in Minnesota, Nebraska, and North Dakota. She is pursuing her Wisconsin Title Examiner certification, which is expected to be completed in Fall 2025.
Marissa is involved with the following groups: Wisconsin Land Title Association’s (WLTA) Convention Committee & Young Title Professionals; Nebraska Land Title Association’s (NLTA) Convention Committee; Property Record Industry Association (PRIA) National Education Committee; Illinois Land Title Association’s (ILTA) Inclusion, Diversity, Equity & Acceptance (IDEA) Committee; and the National Association of Land Title Examiners and Abstractors (NALTEA).
About Capitol Lien
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