The Future of Fannie Mae and Freddie Mac: What’s at Stake for the Housing Market

Whether you see them as vital to the housing system or outdated holdovers from another era, Fannie Mae and Freddie Mac — the government-sponsored enterprises (GSEs) — continue to stir debate across the mortgage industry. Since being placed under federal conservatorship in 2008, efforts to determine their long-term future have stalled repeatedly. Now, with the start of a new presidential administration, momentum is once again building around the idea of releasing the GSEs from government control. Recent stock market activity and leadership changes within the agencies have added fuel to that conversation. But even with renewed political interest, lenders and housing experts remain wary. Many suspect that exiting conservatorship could result in higher mortgage rates for borrowers — a steep price at a time when affordability is already strained.

The crux of the issue lies in the role Fannie and Freddie play in the broader mortgage ecosystem. While they don’t originate loans, they are essential to liquidity — purchasing mortgages from lenders, pooling them, and selling them as mortgage-backed securities (MBS) to investors. This structure keeps capital flowing and rates relatively low. Investors’ confidence in these securities hinges largely on the government’s backing of Fannie and Freddie, both explicitly and implicitly. Without that support, borrowing costs could rise. And even a move back to a so-called “implicit guarantee” might be enough to rattle investors, prompting them to demand higher returns and pass those costs along to homeowners.

Today, both enterprises are financially stronger than they were during the 2008 crisis, with significant capital reserves and mechanisms like credit risk transfers in place. But their current success still depends heavily on the perception of government support. Any privatization plan that fails to preserve some form of federal guarantee risks disrupting the MBS market, which exceeds $10 trillion. While there's speculation about ways to provide an explicit backstop — potentially through legislation — such a move faces political headwinds in Congress. And while some in the administration have floated the idea of a release that keeps rates stable, the process will be long and complex. At the heart of the debate is a fundamental question: Should taxpayers continue to bear the risk while private investors reap the reward? Without careful design and oversight, privatization could simply recreate the flawed incentives that led to the last crisis.

Ultimately, any path forward must balance market stability, investor confidence, and equitable access to homeownership. The industry is watching closely as proposals emerge, knowing that shifts to the GSE framework will have a direct and immediate impact on mortgage rates, loan availability, and the health of the housing market. As this conversation evolves, lawmakers will need to ensure that the public is fairly compensated for the risk it assumes — and that the long-term sustainability of the housing finance system remains the top priority.