As the inauguration of President-elect Donald Trump approaches on January 20, 2025, significant changes are anticipated in the U.S. mortgage landscape. Trump has announced plans to privatize Fannie Mae and Freddie Mac, two major government-owned mortgage companies that have been under federal conservatorship since the 2008 financial crisis [2920535]. This move is supported by hedge fund tycoon Bill Ackman, who argues that privatization could relieve the companies from conservatorship and potentially benefit the federal government financially [2920535].
Fannie Mae, established in 1938 and publicly traded since 1968, along with Freddie Mac, created in 1970, guarantees about half of the $12 trillion U.S. home loan market. The implications of their privatization are significant, as critics warn that it could lead to increased mortgage costs for American families. Vice President Kamala Harris has indicated that such a shift could add approximately $1,200 annually to the typical mortgage payment, a concern that resonates amid rising mortgage rates [098f9521][2920535].
Economists Jim Parrott and Mark Zandi have projected that privatization could raise 30-year mortgage rates by between 0.43% and 0.97%, translating to an additional cost of $730 to $1,670 per year for homeowners [098f9521]. However, Mark Calabria, a former director of the Federal Housing Finance Agency, contends that fears regarding rising costs are exaggerated and that the market could adapt to privatization without significant adverse effects [098f9521].
Despite the push for privatization, questions remain about whether the new private entities would retain any government guarantees that have historically provided stability to the housing market [098f9521]. The ongoing debate about the future of these mortgage giants is closely tied to Trump's broader economic policies, which include significant tax cuts and tariffs aimed at reshaping the American economy [098f9521].
As the election draws closer, the potential privatization of Fannie Mae and Freddie Mac raises critical questions about the future of mortgages in the U.S. The intersection of these policies with rising mortgage rates and inflation concerns will be pivotal as voters consider their options in the upcoming election [098f9521].