The industry is buzzing with the question: “Will Donald Trump privatize Fannie Mae and Freddie Mac during his second term as U.S. President?”
Fannie Mae and Freddie Mac currently back 70% of all U.S. mortgages. And as Mark Zandi, chief economist for Moody’s Analytics, pointed out in a CNN article, privatizing them could cost the average homeowner an extra $1,800 to $2,800 a year—or $150 to $233 a month.
That additional cost could easily put homeownership dreams on hold for many potential buyers.
So, as discussions of this bold policy shift gain traction ahead of Trump’s second term, the stakes are high for homeowners, buyers, and the entire real estate industry.
Here’s what you need to know about this potential shake-up—and how it could impact your clients and your business.
For a full breakdown of the article, watch today’s Hot Sheet with BAM co-founder Byron Lazine:
How Privatization Could Raise Borrowing Costs
Fannie Mae and Freddie Mac aren’t household names for most buyers, but their role in the housing market is essential. By purchasing mortgages from lenders and selling them to investors, these government-backed giants keep money flowing through the system, ensuring (or at least improving) stability and affordability for borrowers.
If privatized, Fannie and Freddie would lose their government safety net, making loans riskier in the eyes of investors. To offset this risk, investors would likely demand higher interest rates, which would ultimately fall on borrowers.
Mark Zandi, chief economist for Moody’s Analytics, estimates the added cost of a mortgage could range from $1,800 to $2,800 annually for a typical homeowner in today’s market. Buyers with lower credit scores or incomes would face the highest hurdles, as their borrowing rates would rise even more steeply.
The idea doesn’t sit well with those who were hoping a Trump presidency would lead to lower housing costs.
The Ripple Effects on Housing Affordability
The housing market is already under pressure from high mortgage rates, limited inventory, and escalating home prices. Adding higher borrowing costs to the mix could push homeownership further out of reach for many Americans—especially first-time home buyers.
Real estate professionals should prepare for the possibility of clients facing more financial strain, requiring even greater creativity in helping them navigate their options.
Educating buyers about market trends and advocating for buyer-friendly policies will be critical in maintaining access to affordable housing.
What’s at Stake for the Housing Market?
The idea of privatizing Fannie Mae and Freddie Mac isn’t new. It’s been debated since the two companies were brought under government control during the 2008 financial crisis.
However, making this shift now could destabilize the market. These companies are valued at $146 billion, and a privatization effort would have to balance financial returns for the government with the need to keep housing accessible for Americans.
Without careful planning, bond traders might view mortgage-backed securities as risky investments, further driving up borrowing costs.
Real estate professionals should be prepared for these ripple effects, as they could reshape the landscape of home financing for years to come.
What Should Real Estate Agents Do Now?
While privatization is still just a possibility, it’s a good idea to stay informed about how this debate develops.
The housing market stands at a crossroads, with the potential privatization of Fannie Mae and Freddie Mac posing significant challenges for affordability and stability.
For real estate professionals, this moment underscores the importance of being prepared, resourceful, and informed. The best (and most enjoyable) way to do this is to watch—or listen to—the three BAM podcasts created specifically to empower real estate agents with the market and industry knowledge they need to guide and educate their clients:
- Hot Sheet—every Monday through Thursday at 9:30 am ET when the markets are open
- The Real Word—every Tuesday at 2 pm ET
- Knowledge Brokers Podcast—every Friday at 2 pm
If president-elect Trump moves forward with his plan to privatize Fannie Mae and Freddie Mac, how will you prepare yourself for the conversations you’ll need to have with consumers?
