What Happens When Fannie and Freddie Go Private?

By Nick Kellar

Nick Kellar is a dedicated real estate consultant, investor, and community steward serving Baltimore and the surrounding areas.

Have you heard about the potential changes coming to the mortgage market? It’s something many people aren’t talking about yet, but it could change how mortgages work in the U.S. It all started with a simple statement:

“I’m seriously thinking about bringing Fannie Mae and Freddie Mac public.” Trump made this comment on May 21, and it has sparked conversations that could impact how we buy and sell homes.

Now, if you’ve never paid attention to Fannie or Freddie before, here’s why this matters: Fannie Mae and Freddie Mac are the backbone of the mortgage world. They buy up home loans from lenders so banks can keep lending. That’s what helps keep rates low and credit flowing.

Back in 2008, they were caught in the middle of the housing collapse. The government took control, basically putting them in a financial ‘time out’ known as conservatorship. And they’ve been there ever since, quietly supporting around 70% of the mortgage market.

Now, there’s renewed pressure to take the training wheels off and send them back into private hands. What are the potential impacts of this on anyone trying to buy or sell a home?

1. Higher mortgage rates. Privatizing Fannie and Freddie could make mortgage investments feel riskier. And when risk goes up, so do rates. One study in 2020 suggested that removing federal support could bump rates up by 30 to 50 basis points. That’s roughly $60–$100 more per month on a typical mortgage.

2. Harder to get a loan. Today, these agencies back loans with just 3% down, even for borrowers without perfect credit. That could change. A private version might tighten standards and make it tougher, especially for first-time buyers.

3. More market fluctuations. Right now, government backing adds a layer of stability. Without it? Mortgage prices and availability could swing more, especially during downturns.

4. Great for investors, maybe not for buyers. Shareholders who’ve been waiting since 2008 could finally cash in. But the trade-off might be higher costs and less predictability for everyday homeowners.

Why do they want to remove Fannie Mae and Freddie Mac from government control? Here are four reasons why:

It was supposed to be temporary. The 2008 conservatorship was meant to be a short-term emergency measure, not a 16-year government takeover.

Reduce taxpayer risk. While Fannie and Freddie are profitable now, the government still backs their guarantees. If another crisis hits, taxpayers are on the hook. Privatization could offload that risk to the private market.

Unlock investor value. There are private shareholders who held stock before the 2008 bailout, and they’ve been stuck in limbo. Ending conservatorship could restore shareholder rights and unlock value, which has led to pressure from investor groups and hedge funds. This is also a reason critics argue against it.

Promote a more competitive mortgage market. Some believe the government has too large a footprint in housing finance. How much government do we want involved in our free markets? Should they also intervene in energy, internet, insurance…groceries? Privatizing Fannie and Freddie could encourage more competition and innovation from private lenders and investors.

Rebuild with modern oversight. A restructured, reformed version of Fannie and Freddie, with clear capital requirements and modern regulation, could theoretically perform better without government control, while still protecting the housing system.

This isn’t a cause for alarm, but if you care about how easy it is to buy or sell a home or what your mortgage payment might look like in the next few years, you should be paying attention.

Fannie and Freddie might not be glamorous, but they help keep the American Dream affordable, and messing with them could reshape the market. If you’re planning to buy, sell, or refinance in the next few years, changes to Fannie and Freddie could affect your monthly payment, your loan options, or both.

What do you think? Should we let them go private? You can reach me at (443) 375-2224 or nick@storyline-homes.com. Let’s talk about it.