The Trump administration is considering a partial privatization of Fannie Mae and Freddie Mac, the government-backed mortgage giants that support 70% of U.S. home loans. Promoted by FHFA Director Bill Pulte, the plan could generate profits for wealthy Trump donors but raises concerns about market stability and higher mortgage rates. Critics argue it offers little benefit to taxpayers while risking financial disruption.
Fannie Mae and Freddie Mac, formed over 50 years ago as government-sponsored enterprises, were seized by the federal government in 2008 during the housing crisis to avert their collapse. Since then, they have operated under conservatorship, guaranteeing mortgages in the $13 trillion U.S. housing finance system to reduce lender risk and make homeownership more accessible. The companies were previously owned by private stockholders, but Congress and past administrations have delayed reprivatization due to fears of economic fallout.
In 2025, FHFA Director Bill Pulte, a 37-year-old appointee with limited housing experience despite his family ties to Pulte Homes, began advocating for a stock offering to sell portions of the firms to private investors. Pulte, who fired much of the companies' boards and appointed himself chairman—a move experts like MIT economist Simon Johnson call legally questionable—has emphasized extracting value for taxpayers. However, economists such as Mark Zandi of Moody's Analytics counter that the government already controls the firms and their billions in annual profits, making a sale a neutral exchange with no net gain for the public.
The proposal has drawn scrutiny for potentially enriching major Trump supporters. Hedge fund manager Bill Ackman, via Pershing Square, holds stakes worth about $1 billion, while John Paulson has significant investments. Senator Elizabeth Warren expressed alarm, stating, "I am very worried that the Trump administration is very focused on how the billionaires are gonna do in any Fannie/Freddie deal, and not paying any attention at all to what the young family that's hoping to buy their first home is gonna do as a consequence."
Trump has signaled interest, posting on Truth Social in May that he is working to take the companies public while retaining implicit government guarantees. Yet, key questions remain unresolved: how to handle the firms' hundreds of billions in debt to the government, establish capital reserves to prevent future bailouts, and ensure ongoing regulation. Pulte recently clarified on CNBC that the plan involves an initial public offering without full privatization, but experts like Susan Wachter warn of systemic risks if mishandled, potentially driving up 30-year mortgage rates. Mike Calhoun of the Center for Responsible Lending noted that uncertainty alone could increase borrowing costs as investors demand higher returns for added risk.
Former FHFA Director James Lockhart stressed the need to address the 'heads, shareholders win; tails, taxpayers lose' imbalance before any release. With valuations in the hundreds of billions, even a 3% to 6% stake sale could raise $30 billion, per Treasury Secretary Scott Bessent, but without clear terms, investors may undervalue the shares, shortchanging taxpayers.
