Trump may renew a housing fight that could rattle mortgage rates

During his second term, President-elect Donald Trump may try to fulfill the longstanding Republican goal of privatizing Fannie Mae and Freddie Mac, the mortgage giants at the center of buying a home in America.

During his second term, President-elect Donald Trump is widely expected to privatize Fannie Mae and Freddie Mac, the mortgage giants that guarantee 70% of America’s mortgages. Amid a housing market marked by stubbornly high mortgage rates, a long-standing supply shortage and soaring home prices, some economists warn that privatizing these two mortgage behemoths, worth a combined $146 billion as of the third quarter of this year, would be overly complicated and could make it more expensive for many Americans to borrow money to purchase a home. Trump’s first administration tried — and failed — to wrest Fannie and Freddie from the government conservatorship that’s been in place since the 2008 financial crisis. The government’s stake in the two mortgage giants could be valued at billions of dollars, meaning a spinoff would potentially net a big payday for the government and private investors in the two companies, said Ted Tozer, who led Ginnie Mae, a separate government-sponsored mortgage company, during the Obama administration. “Bringing them back to private companies isn’t outlandish,” Tozer said. “The question is, is it worth the pain of the transition?” In a 2016 paper, Mark Zandi, chief economist at Moody’s Analytics, estimated that full privatization of Fannie and Freddie would cost the typical American taking out a new mortgage $1,200 annually. Taking into account home prices and interest rates in 2024, that added cost today would be between $1,800 and $2,800 per year for a typical mortgage holder, Zandi told CNN after updating his original paper’s calculations. Zandi said the added cost would be even greater for Americans with lower incomes or credit scores. The risk is that privatization efforts could spook investors without assurances that the government would bail out Fannie and Freddie in a crisis like in 2008. Investors who buy up the loans would likely demand higher rates for lower-income borrowers to compensate.