Our Take on what Privatization of Fannie & Freddie Means for your Investments.

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Report
 | 
Evolving Workforces
Privatization of Fannie Mae and Freddie Mac
The Privatization Playbook: What’s Next for Fannie Mae & Freddie Mac in 2025?
CBRE RESEARCH
 | 
January 2025
CBRE
If 2024 was the setup, 2025 could be the year the curtain finally rises on the long-debated privatization of Fannie Mae and Freddie Mac. With President-elect Trump preparing for his second term, whispers have turned into firm plans, and mortgage markets are bracing for impact.

A Long Time Coming
Fannie and Freddie, the mortgage titans supporting over 70% of U.S. mortgages, have been under government conservatorship since 2008 following catastrophic losses during the financial crisis. While the GSEs repaid their $187 billion bailout with interest, they've remained under tight federal control, with Treasury holding an 80% ownership stake .
Now, with a second Trump term looming, privatization is back on the table—again. Early roadmaps from the Treasury and FHFA outline a pathway for an “orderly exit”, but no one’s underestimating the complexity of this task.
 

The Privatization Puzzle
Key components of the privatization process include:
  • Capital Requirements: Fannie and Freddie would need to hit roughly $300 billion in combined capital reserves, nearly double their current levels.
  • Public vs. Private Balance: Will there still be an implicit or explicit government guarantee backing their securities? 
  • Legislative Gridlock: Treasury and FHFA might attempt to bypass Congress entirely, relying on administrative tools instead.
Experts predict this won't be an overnight change. Former FHFA head Mark Calabria suggests a 70% chance of privatization by 2027, not 2025.
 

The Mortgage Market Domino Effect
So, what happens if privatization proceeds?
  • Mortgage Rates: Expect higher rates—potentially rising between 0.25% and 0.97%—as borrowing costs increase without federal guarantees.
  • 30-Year Fixed Mortgages at Risk: The iconic 30-year fixed-rate mortgage could become a casualty, as private markets may shy away from its risk profile.
  • Affordable Housing Concerns: Policymakers are wary that privatization could disproportionately impact lower-income and underserved communities.
For borrowers, this could mean an extra $1,200 per year on the average mortgage payment.
 

Winners & Losers
  • Shareholders: Investors like Bill Ackman, who hold stakes in Fannie and Freddie, could see massive windfalls if the companies go public again.
  • Homebuyers: The average American household might bear the brunt of increased borrowing costs.
  • Policymakers: A privatization misstep could trigger political backlash if mortgage costs rise sharply.
 

2025 Outlook: Proceed with Caution
Privatization is less of a light switch and more of a dimmer knob—adjusted slowly, and hopefully, carefully. Analysts stress that without clear guardrails, a rushed privatization effort could:
  • Rattle the housing market
  • Push mortgage rates higher
  • Trigger systemic instability 
What to Watch:
  • Renegotiation of Preferred Stock Purchase Agreements (PSPAs) between Treasury and FHFA.
  • Signals from Congress on legislative appetite for GSE reform.
  • Market reactions to rate movements in the coming months.
For now, both policymakers and market participants agree: privatization must be deliberate, transparent, and avoid unnecessary shocks to a housing market already navigating elevated interest rates.
 
Sources Cited:
  • Axios (The Quagmire That is Fannie Mae and Freddie Mac)
  • Reuters (Fannie Mae, Freddie Mac Shares Surge After Federal Agencies Reveal Privatization Path)
  • Fortune (Trump Allies Want to Privatize Fannie Mae and Freddie Mac—but Some Economists Warn it Would Make Mortgages Pricier)
  • Barron’s (Taking Fannie Mae Private Could Be Ugly. Mortgage Rates Could Take the Brunt.)
  • HousingWire (Fannie and Freddie Aren’t Going Private Anytime Soon, Mark Calabria Says)
  • Multi-Housing News (What’s Ahead for the GSEs Under the New Administration?)
  • Floify (What if Fannie and Freddie Do Get Privatized Again?)
  • HUD Report (Privatization of Fannie Mae and Freddie Mac: Desirability and Feasibility)
  • Bisnow (Possibility of Privatizing Fannie, Freddie Raises Questions About the Future of Crucial Mortgage Guarantee)
Stay tuned for more updates as this saga unfolds. The stakes are high, and every move will send ripples across the multifamily and housing markets.


CBRE Investment Sales & Capital Markets Team is your dedicated multifamily advisor, committed to delivering actionable market insights that empower you to make informed investment decisions. We pride ourselves on staying ahead of emerging trends, with our ear to the ground and our finger on the pulse of the market—serving as your trusted source for unparalleled market intelligence.

Sincerely,

CBRE | Multifamily Team
 
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