President Trump recently announced on his platform Truth Social that he was considering privatization of Fannie Mae and Freddie Mac, the two primary home loan agencies in the U.S., currently under government control. What wouldn't change, however, is the government's implied backing.
What might that mean for Fannie, Freddie and their borrowers? Potentially, not a lot. Prior to 2008, both organizations (technically, they're now classified as government-sponsored enterprises or GSEs) were in private hands.
What is important here is the pledge to retain the government's guarantee. In other words, if Fannie and Freddie were to fail again in the future, the federal government would step in to rescue them with an unlimited bailout.
Lightbox reckons the two GSEs between them support approximately 70% of all American mortgages, which account for roughly half the $12 trillion U.S. mortgage market.
How Did Fannie and Freddie End up in Government Hands?
Older readers will recognize the significance of the 2008 date we mentioned. It is when the credit crunch hit, partly as a result of a meltdown in mortgage-backed securities, the type of bond that largely determines mortgage rates. That sparked the subsequent Great Recession.
When the government took over Fannie and Freddie in a conservatorship, they needed a $187 billion bailout from the tax payer to keep them afloat, according to The Wall Street Journal. "In return for that money, the government acquired a class of "senior preferred" stock that initially paid a 10% dividend," the Journal explains.
"U.S. taxpayers have recouped all of the $187 billion they gave mortgage giants Fannie Mae and Freddie Mac in one of the most expensive bailouts of the financial crisis," reported CNN Business back in 2014. In February 2025, the Journal said, "the companies have paid the government more than $228 billion, $40 billion more than they took in the bailout."
Pros and Cons of Privatization
So, the government is receiving an income stream from Fannie and Freddie, and privatization advocates wish to sell that in exchange for a lump sum, which some believe could bring in a significant windfall. They also believe that the private sector provides better management for enterprises than governments.
Critics would point to examples (think Enron) of private-sector managerial disasters. And they might suggest that private management with a federal guarantee could be less than responsible, taking big risks with no risk to the downside.
But the perhaps the most powerful argument for the status quo was provided by Laurie Goodman, founder of the Housing Finance Policy Center at the Urban Institute, a Washington think tank, when she was interviewed by The New York Times in February. She said that "though the conservatorship might be unpopular, the current arrangement was largely working. She said a rushed decision could make mortgages more expensive and bring about other unintended consequences. 'Do you want the current system, which isn’t broken, or what is behind door No. 2 and we don’t know what it is?'"
