The Wall Street Journal reports that President Trump’s plan of bringing both Fannie Mae and Freddie Mac public will reportedly occur before the end of 2025.
The initial public offering (IPO) of Fannie Mae and Freddie Mac is estimated to raise approximately $30 billion for the government. It is still up for debate whether or not the two entities would IPO as one company or two separate.
The planned IPO could see both companies valued at $500 billion or more combined, and could entail selling between 5% and 15% of their stock.
President Donald Trump recently engaged with some of the nation’s top banking minds in order to explore bringing Fannie and Freddie public. Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs), help provide stability and affordability to America’s home mortgage market. The National Association of Realtors (NAR) reports that Fannie and Freddie support approximately 70% of the U.S. mortgage market.
“The Trump administration’s potential move to IPO Fannie Mae and Freddie Mac later this year could mark a seismic shift in housing finance,” said Realtor.com Senior Economist Jake Krimmel. “But the long-standing assumption of an implicit government guarantee remains key for the financial system and consumers. Historically, that perception has kept mortgage rates low and helped ensure access to mortgage credit for borrowers across income levels. If an IPO weakens the market’s belief that the government stands behind the GSEs in a crisis, mortgage costs could rise and access to credit could tighten, especially in a downturn.”
President Trump has reportedly met with J.P. Morgan CEO Jamie Dimon and Goldman Sachs CEO David Solomon on the matter, as well as Bank of America CEO Brian Moynihan. During these sessions, Trump has reportedly discussed ideas and strategies on launching large-scale IPOs for Fannie and Freddie, and how some of the nation’s major banks could participate in the process.
On September 6, 2008, with consent of both Fannie Mae’s and Freddie Mac’s Boards of Directors, the Director of the Federal Housing Finance Agency (FHFA) exercised statutory authority to place each GSE into conservatorship. This move established the two conservatorships in response to a deterioration in the housing markets that severely damaged the financial condition of each, and left both of them unable to fulfill their missions without government intervention.
“To maintain confidence, several details will need to come into focus,” added Krimmel. “First, will there be an explicit federal backstop, or regulatory mechanisms to replicate it? Second, how will capital requirements be calibrated to balance financial resilience with the GSEs’ affordability mission?”
In late May, President Trump took to social media platform Truth Social, stating: “Our great Mortgage Agencies, Fannie Mae and Freddie Mac, provide a vital service to our Nation by helping hardworking Americans reach the American Dream—Home Ownership. I am working on TAKING THESE AMAZING COMPANIES PUBLIC, but I want to be clear, the U.S. Government will keep its implicit GUARANTEES, and I will stay strong in my position on overseeing them as President. These Agencies are now doing very well, and will help us to, MAKE AMERICA GREAT AGAIN!”
Without clarity on the IPO of Fannie and Freddie, consumer protection and risk management come into play, and their role within the market role create a ripple through the housing finance market.
“To maintain confidence, several details will need to come into focus. First, will there be an explicit federal backstop, or regulatory mechanisms to replicate it? Second, how will capital requirements be calibrated to balance financial resilience with the GSEs’ affordability mission?” added Krimmel. “The upshot is that Fannie Mae and Freddie Mac play a central role in keeping the mortgage market liquid and stable. Their presence helps extend access to credit and more broadly, they are essential to supporting homeownership across the country. Without clear answers on how the IPO would affect Fannie and Freddie’s implicit guarantees of downside protection, their approach to managing risk, and their role within the existing regulatory environment, the worry is that the GSEs’ market role changes in ways that ripple through housing finance.”
